It’s been quite a day for stocks and currencies through the European and North American sessions. Prior to today’s meetings on Greece, there was a distinct flight to quality that sent USD and JPY soaring, EUR, GBP and NOK into a nosedive and commodities lower.
Once the meetings got underway, however, things started to change. Although Greece didn’t bring any new written proposals today, there has been talk that the country would ask for support, and possibly a short term arrangement while a longer term deal can be worked out. Greece is widely expected to submit a proposal tomorrow and a conference call among finance ministers is scheduled.
There also appears to be a split among EU countries with Germany leading a faction wanting no changes and possibly a Grexit while France appears to be at the forefront of a faction taking a somewhat more conciliatory approach (or not) . The IMF remains quiet after indicating last week the need for Greek debt reduction. Meanwhile, more may be going in the background as reports suggest US leaders have been in contact with several of the key participants and expressing a desire for compromise to keep the Eurozone together.
The EU summit has gone on for nearly four hours now with no news. Some traders appear to be seeing Greece not immediately walking out or being kicked out as an encouraging sign. US stocks rallied in the afternoon and finished the day in the green, while USD and JPY dropped back, enabling EUR, GBP and other majors to cut some of their recent losses.
Statements from various leaders once the meeting ends could rock the markets depending on how things go. At this point traders appear to be looking for an idea on which way the wind is blowing on whether there is room for compromise to keep EUR together or if this could be the beginning of a long-term dismantling. Things can still turn on a dime.
In addition to Greece, China continues to dominate the news. Although indices
are starting to get oversold as they approach the ranges they were at prior to their March rocket launch, trading could remain volatile for some time to come as they digest the massive upward and downward shocks of the last several months. Government and securities officials have introduced trading limits on futures and some shares and more supportive measures could come today but they can only do so much because so much of the action is being driven by internal dynamics and capital flows.
Fears that the sudden drop in Chinese stocks could destabilize the economy and impact resource demand continue to weigh on commodities, particularly copper and silver which were hammered in today’s trading.
Some of the pressure on commodities eased as USD came back down which enabled crude oil to finish the day in positive territory. Although tomorrow brings US energy inventories, Iran talks remain a big wildcard where developments could spark big trading swings in either direction.
There’s not much in the way of scheduled news for Asia Pacific markets today. Momentum coming out of the US session has been positive for a change. Bear traps, bullish intraday reversals and hammer candles all over the place suggest a bottom could be forming but capital flows and unscheduled news from the China, Greece, or Iran situations could still spark significant moves and opportunities for trading.
Latest reports as I write this suggest Germany is still sticking to its no haircut stance in opposition to the IMF. European Council President Tusk is saying they need to reach a deal by Sunday or else. EU President Juncker is apparently suggesting the EU has a Grexit plan ready. Deadlines for proposals vary between Thursday and Monday morning depending on the speaker. Apparently a summit of all 28 EU countries has been scheduled for Sunday, which looks like Final Decision Day. It seems creditors have doubled down and are demanding even more austerity. News moving fast but overall it looks like the creditors are putting the hammer down and not budging at all.
There have been no major corporate reports after the US close today.
Significant announcements released overnight include:
Canada trade balance ($3.34B) vs street ($2.5B)
US trade balance ($41.8B) vs street ($42.7B)
IMF US GDP forecast cut 2.5% from 3.1%
UK industrial production 2.1% vs street 1.6%
UK manufacturing production 1.0% vs street 1.8%
UK NIESR GDP estimate previous 0.6%
Germany industrial production 2.1% vs street 2.6%
Norway industrial production 4.2% vs previous (3.4%)
Upcoming significant announcements include:
There are no major announcements scheduled for Asia Pacific countries today.
12:00 am BST UK BRC shop prices previous (1.9%)
8:00 am BST UK Halifax house prices street 8.3%
10:00 am EDT US DOE crude oil inventories street 0K
2:00 pm EDT US FOMC minutes
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