This page has been archived and commenting is disabled.
Market Wrap: Greek "Capitulation" Optimism Sends Global Risk Higher After China Re-crashes
Before we focus on the Greek drama which this morning has soared to new highs, a quick look at China which after trading largely unchanged for most of the day, saw a bout of late day selling, which brought the Shanghai Composite 5.2% lower, wiping out all Tuesday rebound gains, and back to the Monday post-PBOC crash level.One thing that was clear: nobody cared about the Chinese PMI data, where both the official PMI and HSBC Mfg PMI missed expectations and printed at 50.2 (exp. 50.4) and 49.4 (Exp. 49.6), respectively.
Other Asian equities mostly rose following renewed negotiations between Greece and its creditors with the Nikkei 225 up +0.5% following a strong BoJ Tankan survey if not so strong real wages which are now down for a record 25 consecutive months, with capex expectations at the highest level since 2004. JGBs fell 20 ticks despite the BoJ conducting its JGB purchase program while participants also look ahead towards tomorrow's 10-year JGB auction. Hang Seng was closed today due to a public holiday.
So now a quick recap on the state of play in Greece courtesy of RanSquawk:
- FT writes citing leaked letter that Greek PM is prepared to accept bailout conditions
- ECB's Nowotny says that the ECB have kept the Greek ELA unchanged at EUR 88.6bIn. (BBG) These comments come amid reports that the ECB is poised to impose tougher haircuts on the collateral that Greek lenders place in exchange for the emergency loans, according to the FT. Nowotny also added that the threat posed by Greece to the EUR is below what it was previously. According to sources, German finance minister Schaeuble informed conservative lawmakers that he would request that the ECB does not increase the ELA for Greek banks. (RTRS)
- Eurogroup will hold a call again at 1630BST/1030CDT today in regards to Greece, according to an EU official. (BBG)
- Greece may suspend the referendum (July 5th) if talks restart and there was an offer and agreement on required prior actions, according to the Maltese PM, with these comments later echoed by the Greek government. (BBG/Times of Malta)
- Austrian Finance Minister Schelling stated Greek Finance Minister Varoufakis announced new proposals, adding that Greece should not accept loans without conditions. (BBG)
- Eurogroup chief Dijsselbloem says institutions will debate the request for a further bailout program only following the referendum, this was also reiterated by German Chancellor Merkel. (BBG)
- ECB's Praet says that the central bank will implement further policy measures if required, he also says that the ECB stimulus will remain as long as it is required. (BBG)
- According to the Prorata poll, before the bank closures the `No' camp for accepting the terms of the bailout was on 57% with the 'Yes' vote at 30%. After the banks closed this changed to `No' 46% and `Yes' 37%. Note that polls reported yesterday all showed varying results.
Despite the downbeat view the market has taken on Greece throughout the week, stocks in Europe trade higher this morning with fixed income products lower in a reversal of recent moves as participants respond to the latest developments surrounding the troubled nation. Heading into the US open, European equities have been provided a further lift from their opening gains by reports in the FT that Greek PM Tsipras is prepared to accept bailout conditions, according to a leaked letter. Sentiment was already supported by news that the Eurogroup will be holding a teleconference call at 1630BST on the latest state of play with Greece, which could see a formal announcement by the group on the latest set of proposals.
This could subsequently lead to a suspension of the July 5th referendum, according to the Greek government although Eurogroup chief Dijsselbloem says institutions will debate the request for a further bailout program only following the referendum, this was also reiterated by German Chancellor Merkel.
Fed's Bullard (Non-voter, Hawk) said that a Fed rate lift off is "very much in play" for September but also will be on the table for July, while also reiterating that every FOMC meeting is in play and is data dependent. (BBG)
Despite initially trading in a more subdued manner, EUR has erased its initial losses heading into the US open amid the aforementioned reports regarding Tsipras' willingness to accept the demands of Greek creditors, news which has subsequently pressured the USD-index back into negative territory.
Elsewhere, antipodean currencies traded higher overnight amid upbeat Australian building approvals data, with supported also lent to AUD and other commodity related currencies from a resurgence in energy prices. Finally, GBP/USD has broken to a fresh session lows in recent trade in the wake of disappointing UK manufacturing PMI data with the pair tripping stops through the earlier weekly low of 1.5664.
In the commodity complex, price action for energy markets was initially swayed by the latest API inventory report which showed the first build in a month in crude stockpiles. (-1.9mln vs. Prey. -3.2mIn). Furthermore, participants also continue to assess the ramifications of Iranian nuclear talks which could lead the nation to provide yet more supply to the market with OPEC seemingly unwilling to cull existing production levels. However, some of the downside in prices was erased by the latest Greek developments which weighed on the USD-index.
Elsewhere, precious metals markets traded in a relatively rangebound manner throughout the session with the data overnight from China failing to weigh on spot gold and silver, although some of the recent safe-haven bid for prices was unwound alongside improved sentiment surrounding Greece. Elsewhere, copper prices were weighed on overnight by the PMI data with Nickel extending recent losses to a fresh 6yr low.
In summary: European shares rise with the basic resources and oil & gas sectors underperforming and autos, technology outperforming. Greece offers to accept proposals from creditors, subject to certain conditions. U.K. manufacturing grows at slowest pace in over 2 yrs. The French and Italian markets are the best-performing larger bourses, Swiss the worst. The euro is weaker against the dollar. Greek 10yr bond yields rise; German yields increase. Commodities decline, with nickel, Brent crude underperforming and copper outperforming. U.S. Markit U.S. manufacturing PMI, ISM manufacturing, construction spending, vehicle sales, mortgage applications, ADP employment change, Challenger job cuts due later.
Market Wrap
- S&P 500 futures up 1% to 2074
- Stoxx 600 up 1.8% to 388.2
- US 10Yr yield up 4bps to 2.4%
- German 10Yr yield up 5bps to 0.82%
- MSCI Asia Pacific up 0.2% to 146.7
- Gold spot little changed at $1172.4/oz
- All 19 Stoxx 600 sectors rise; basic resources, oil & gas underperform, autos, tech stocks outperform
- Asian stocks rise with the Kospi outperforming and the Shanghai Composite underperforming.
- MSCI Asia Pacific up 0.2% to 146.7
- Nikkei 225 up 0.5%, Kospi up 1.1%, Shanghai Composite down 5.2%, ASX up 1%, Sensex up 1%
- 6 out of 10 sectors rise with telcos, utilities outperforming and tech, financials underperforming
- Euro down 0.18% to $1.1127
- Dollar Index up 0.23% to 95.71
- Italian 10Yr yield down 10bps to 2.23%
- Spanish 10Yr yield down 10bps to 2.21%
- French 10Yr yield up 3bps to 1.23%
- S&P GSCI Index down 0.5% to 438.6
- Brent Futures down 0.7% to $63.1/bbl, WTI Futures down 1.3% to $58.7/bbl
- LME 3m Copper up 0.1% to $5768/MT
- LME 3m Nickel up 0.3% to $12020/MT
- Wheat futures down 0.8% to 611 USd/bu
Overnight Headline Bulletin from Bloomberg and RanSquawk
- Sentiment in Europe has been supported by reports that the Greek PM is prepared to accept bailout conditions
- Further
clarity on the progress of discussions should be provided by the
outcome of discussions from the Eurogroup teleconference at
1630BST/1030CDT - Looking ahead, today sees the release of US
ADP employment change, manufacturing PMI. Construction spending, ISM
manufacturing and DoE inventories - Treasuries decline after Greece accepted creditors’ proposals as basis for compromise to end standoff over bailout; however, PM Tsipras signaled sticking points remain on pensions, tax discounts to Greek islands.
- Creditors still view the Greek referendum, planned for July 5, as an issue for reaching an aid accord, according to an EU official; institutions are now analyzing amendments before submitting analysis to the Eurogroup which will hold call at 5.30pm local time
- While about a third of Greece’s depleted banks cracked open their doors after being closed for three days, all they did was ration pension payments, hours after the country became the first advanced economy to miss a payment to IMF
- Greece’s capital controls are beginning to bite, from standing in line for hours to withdraw maximum daily allowed EU60 to not be able to buy Apple Store apps
- A Chinese factory gauge remained sluggish last month, suggesting a tepid response from manufacturers to loosened monetary policy settings and efforts to shore up local government finances
- China’s $8.1t equity market now has more than 90m individual investors, according to China Securities Depository and Clearing Co, more than the 87.8m Communist Party members at the end of last year, according to Xinhua
- Markit’s U.K. PMI dropped to 51.4 in June, less than forecast, from 51.9 in May; while total new orders rose, export orders fell for a third month
- Sovereign 10Y bond yields mostly higher; Greece 10Y yields approach 16%. Asian stocks mixed; Shanghai plunges over 5%. European stocks higher, U.S. equity-index futures rise. Crude oil lower, copper higher, gold little changed
US Event Calendar
- 7:00am: MBA Mortgage Applications, June 26 (prior 1.6%)
- 7:30am: Challenger Job Cuts y/y, June (prior -22.5%)
- 8:15am: ADP Employment Change, June, est. 218k (prior 201k)
- 9:45am: Markit U.S. Manufacturing PMI, June final, est. 53.4 (prior 53.4)
- 10:00am: Construction Spending m/m, May, est. 0.4% (prior 2.2%)
- 10:00am: ISM Manufacturing, June, est. 53.2 (prior 52.8)
- ISM Prices Paid, June., est. 51.0 (prior 49.5)
DB's Jim Reid fills what gaps we may have left:
The tensions are heating up in Greece with lots of headlines and rhetoric but little incremental developments to the story over the last 24 hours. Interestingly I got a couple of emails from travel companies yesterday offering very cheap packages to Greece. That probably reflects the damage this impasse is having on the tourist industry during this peak season period. In terms of news, overnight we got the confirmation that Greece failed to make the €1.6bn payment due to the IMF which came as no surprise following the events of the last few days. A confirmation email from IMF spokesman Gerry Rice confirmed that Greece is now in arrears to the Fund. So with that, Greece now joins the historical ranks of countries including Cuba, Zimbabwe and Sudan as nations who’ve fallen into arrears with the fund. We’ve highlighted previously the various technicalities that now follow a non-payment and the cross-default implications on other EFSF loans, GGB’s and Greek CDS. However its unlikely that the Europeans are going to accelerate anything with regards to the EFSF before the referendum.
Before we got the non-payment confirmation, headlines yesterday were dominated by various reports of extension requests. Greece again made a request for a short-term extension of the existing program – which was swiftly rejected – while we also got the news that Athens submitted a request for a 2-year loan from the ESM. Although Eurozone finance ministers are set to discuss the request today (expected 10.30am GMT), the tone from Europe is one of pushback with German Chancellor Merkel in particular saying that there will be no new negotiations until after Sunday’s referendum. Eurogroup President Dijsselbloem, although acknowledging that the request will get looked at, also highlighted that ‘a new program takes time and will have to contain tough measures and payments’, while ‘the situation will unfortunately further deteriorate and the only way to solve this quickly is when the government will take another political position’. Certainly the bulk of the commentary on the wires was one of the offer being something of a non-starter in any case.
There’s been little in the way of much negative reaction in equity markets in Asia this morning to the non-payment. Aside from a more mixed performance in China where the Shenzhen is +1.15% and the Shanghai Comp -0.27%, most major bourses are firmer with the Nikkei (+0.30%), Kospi (+1.12%) and ASX (+0.52%) all up. Asia credit markets are around a basis point tighter while sovereign bond yields in the region are around 2-3bps wider.
It’s been a busy morning for data meanwhile. In Japan we saw the Q2 Tankan survey which showed a rise of 3pts to 15 in the large manufacturer’s index, and 4pts to 23 for large non-manufacturing companies, while small manufacturer’s declined 1pt to 0 for the quarter, although small non-manufacturer’s rose 1pt to 4. Our colleagues in Japan noted that the most important development in the survey was a large upward revision in the FY15 capex plan across all industries and companies. The plan was revised upward to 5.6% yoy which is up 5ppt from the Q1 survey. Meanwhile over in China, the June PMI readings made for slightly more mixed reading. There were contrasting figures from the official and non-official manufacturing PMI readings. The former showed no change to the 50.2 print, while the latter HSBC print was revised down to 49.4 from 49.6 previously, the fourth straight sub-50 reading. The details still point to overall sluggishness in the economy. The official non-manufacturing print made for slightly better reading however, with the print up 0.6pts to 53.8, a four-month high.
Back to markets yesterday, European equities again remained under controlled pressure for most of the session, although not without plenty of intra-day volatility in reaction to the various Greece headlines which came out over the day. Indeed the Stoxx 600 (-1.26%), DAX (-1.25%) and CAC (-1.63%) all ended the quarter on a weak note, while peripheral bourses actually outperformed with the IBEX and FTSE MIB -0.78% and -0.48% respectively. There were similar choppy moves in US markets, although the S&P 500 (+0.27%) and Dow (+0.13%) did finish the session a touch higher at the close reflecting perhaps the last-minute pitch for an extension. It was a stronger day across the board for European bond markets. 10y Bunds fell 3.1bps in yield to 0.762%, while in the periphery we saw Italy (-5.6bps), Spain (-4.5bps) and Portugal (-6.6bps) all recover some of Monday’s move wider. The same couldn’t be said for Greece however as we saw 2y (+125bps) and 10y (+22bps) yields again move higher. 10y Treasuries traded with little obvious direction having moved in an 8bps range over the course of yesterday’s session, before eventually ending 2.9bps wider at 2.354%.
Yesterday’s mixed data-flow in the US did little help to provide conviction one way or another. Despite rising 3.2pts to 49.4, the Chicago PMI for June still came in below expectations (50.0 expected) for the second straight sub-50 reading. In terms of housing data, the Case-Shiller house price index rose +0.30% mom during April (vs. +0.80% expected) which was the smallest increase since September last year. There was positive news out of the June consumer confidence index however where the 101.4 print (vs. 97.4 expected) rose 6.8pts from May. Over in Europe yesterday, we got the preliminary June CPI print for the Euro area which came in as expected at +0.2% yoy while the advanced reading for the core was also as expected at +0.8% yoy (down from +0.9%). In Germany we saw retail sales in the month of May come in well above expectations at +0.5% mom (vs. 0.0% expected), although we did see a 40bps downward revision to April’s reading to +1.3% mom. Staying in Germany, we also saw the unemployment rate remain unchanged at 6.4% as expected, while in France we got some slightly better than expected consumer spending data for May (+0.1% mom vs. -0.2% expected). Finally, in the UK we saw that the final Q1 GDP reading was revised up to +0.4% qoq (from +0.3%), while the annualized rate was taken up to 2.9% yoy from 2.4% previously.
Elsewhere, there was also some Fedspeak for the market to digest yesterday. Vice-Chair Fischer said that there are ‘tentative’ signs of wage growth and further job creation which is giving him confidence that the US labour market will continue improving and is approaching full employment. Although maintaining a data dependent stance, Fischer also said that ‘we should not wait until we have reached our objectives to begin adjusting policy’. The St Louis Fed President Bullard was noted as saying that a September move is still ‘very much in play’. Bullard also noted that he would like to see more evidence of a bounce back in Q2 data and was also quoted as saying that ‘the Fed should hedge against the possibility of a third major macroeconomic bubble in the coming years by shading interest rates somewhat higher than otherwise’.
Quickly running over today’s calendar, data-flow in Europe this morning is centered on the manufacturing PMI’s where we'll see the final readings for the Euro area, Germany and France as well as preliminary prints out of the UK, Italy and Spain. It’s a busy calendar in the US this afternoon with the final revision to manufacturing PMI also, along with ISM manufacturing, prices paid and construction spending. Ahead of payrolls on tomorrow (a day early due to the holiday) there will also be much focus on the ADP employment change reading for June, while we’ll also get Challenger jobs cuts for the same month. Of course, Greece related headlines will continue to dominate in the mean time.
- 19506 reads
- Printer-friendly version
- Send to friend
- advertisements -


fact: referendum for citizens to decide
"FT writes citing leaked letter that Greek PM is prepared to accept bailout conditions"
Come the fuck on, we know this is bullshit. Midnight came and went, no deal was accepted. Now with the call for a referendum, its in the voters hands now. If he cancles the vote, there will be riots on the streets and in parliament.
Theater to justify odd wording of referendum.
Greeks will vote for what TPTB want them to vote for, and the outcome is already known.
TPTB - the pirate the bay?
They were illegally downloading debt, now they must pay with their children's lives!
Or bitcoins...
Tsipras capitulates - the banksters win again
Last updated: July 1, 2015 10:59 am
Alexis Tsipras backs down on many Greece bailout demandshttp://www.ft.com/cms/s/0/e82e0256-1fcb-11e5-ab0f-6bb9974f25d0.html
China recrashes:
https://www.google.com/finance?cid=7521596
http://www.bloomberg.com/quote/SZ399006:IND
A rate rise is "in play" for ever. So is the possibility of the Fed Board all getting sex change operations, moving to Tibet and starting a cult that is based on walking to the sea everyday for a swim and back to the temple in the evening for prayer.
Rates will go up when the 1% are dead...i.e. in about 20 years when we thankfully kill off 95% of life on this planet, giving the remaining 5% a slim hope.
gold is down, must be a new normal for risk "higher"