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Market Wrap: Global Stocks, Futures Jump In Kneejerk Relief Rally; Safe-Haven Assets Drop
For once the Chinese stock market rollercoaster (where the Shanghai Composite closed up 2.4% after another day of early selling) was fully upstaged by events in Europe.
Asian equities rose as participants shrugged off the Greek developments which were fairly pessimistic during the Asia Pacific session. Shanghai Comp (+2.4%) and Hang Seng (+1.3%) continued their recovery as margin trading rose for the first time in 15 sessions, while additional Chinese stocks resumed trading. Nikkei 225 (+1.6%) reclaimed the 20,000 level , whereas the ASX 200 (+0.7%) fluctuated between gains and losses. JGBs fell as strength in Japanese equities pressured prices, while the BoJ also refrained conducting its large buying of JGB's as expected.
But the real action was in Europe, where the German stock market sprang higher by 1.7% on the "deal" news, taking its 4 day gain to an impressive 7.7%:
4-day rally on the DAX +7.72% pic.twitter.com/FCvQXOubvg
— Jonathan Ferro (@FerroTV) July 13, 2015
Other bourses were just as exited with France’s CAC 40 up 2.2% and UK’s FTSE 100 up 0.7% so far.
This is because the Greek saga appears once again to be at the final stages (at least until we find what the official and unofficial Greek response will be) after an overnight 17 hour Eurogroup meeting culminated in a provisional agreement between Greece and their creditors . This provisional agreement has been in focus for European participants, with equities firmly in the green (EuroStoxx: +1.8%) and financials among the best performing sector.
Elsewhere, bunds have also reacted to the news of a deal, moving lower by around 35 ticks this morning. Of note, while a deal has bolstered sentiment in the market, a Greek deal had been on the cards over the past couple of days, with similar price action being observed on Thursday and Friday. Also, any potential deal would still need to be passed through Greek parliament, followed by the German, Austrian, Dutch, Estonian, Slovakian and Finnish parliaments. Also of note, sources have suggested that the ECB will maintain the current level of ELA funding in today's discussions.
In FX, EUR price action altered from that of equities as news filtered out regarding a Greek deal, initially moving higher, before then retracing this move to trade lower by around 80 pips. Some desks have attributed the weakness to the aforementioned hurdles still to come, with the FT noting that some trades had been looking to sell EUR heading into the rally.
Elsewhere, other desks are playing credence to the possibility that with a Greek deal in place, attention will now return to Fed lift-off with Fed Chair Yellen on Friday saying that the FOMC remain on track to hike rates at some point in 2015 and on June 23rd, FT's Short View noted that on a purely technical level negative rates have led to carry trades (borrowing to fund leveraged bets elsewhere). So when markets have assimilated bad news over the last few weeks EUR moves higher as traders cut their exposure and cover the carry trade loans (ie buying EUR) and good news actually means traders can borrow more EUR for more carry trades which pushes EUR lower.
JPY initially saw safe haven bids following the ongoing Greek impasse however, pared its earlier strength amid short covering in USD/JPY to break above its 50 DMA. This combined with EUR weakness to filter through the USD, with the USD index currently higher by 0.4%, further bolstered by comments over the weekend from Fed's Mester (no n-voter, soft hawk) stating the US economy is ready for lift-off.
The commodity market has seen weakness this morning, with precious metals lower as a result of the Greek deal, while the energy complex has also seen a leg lower today as an Iran nuclear deal appears closer, seeing WTI trade below the USD 52.00 handle. Of note today sees the option expiry of Brent Aug'15 futures at 1930BST/1330CDT.
In summary: European shares remain higher, close to intraday highs, with the bank and retail sectors outperforming and food & beverage, autos underperforming. Euro summit reached agreement on Greece, ECB to discuss their liquidity aid for Greek lenders. China’s exports rose for first time in 4-months, above ests. The French and Spanish markets are the best-performing larger bourses, U.K. the worst. The euro is weaker against the dollar. Greek 10yr bond yields fall; U.K. yields increase. Commodities decline, with Brent crude, WTI crude underperforming and nickel outperforming. U.S. monthly budget statement, due later.
Markt Wrap
- S&P 500 futures up 0.7% to 2083.5
- Stoxx 600 up 1.6% to 395.1
- US 10Yr yield up 5bps to 2.45%
- German 10Yr yield up 3bps to 0.93%
- MSCI Asia Pacific up 1.1% to 142.6
- Gold spot down 0.6% to $1156.4/oz
- All 19 Stoxx 600 sectors rise; bank, retail outperform, food & beverage, autos underperform
- Asian stocks rise with the Shanghai Composite outperforming and the ASX underperforming; MSCI Asia Pacific up 1.1% to 142.6
- Nikkei 225 up 1.6%, Hang Seng up 1.3%, Kospi up 1.5%, Shanghai Composite up 2.4%, ASX down 0.3%, Sensex up 1.1%
Euro down 0.73% to $1.108 - Dollar Index up 0.27% to 96.28
- Italian 10Yr yield up 1bps to 2.15%
- Spanish 10Yr yield up 3bps to 2.16%
- French 10Yr yield up 3bps to 1.31%
S&P GSCI Index down 0.7% to 412.6 - Brent Futures down 1.6% to $57.8/bbl, WTI Futures down 1.2% to $52.1/bbl
- LME 3m Copper up 0.7% to $5626.5/MT
- LME 3m Nickel up 2.4% to $11535/MT
- Wheat futures down 0.1% to 575.5 USd/bu
Bulletin Headline Summary From Bloomberg and RanSquawk
- A preliminary Greek deal has been agreed overnight to bolster European equities and weighs on Bunds.
- Meanwhile EUR has weakened as focus shifts to policy divergence between ECB and Fed.
- The energy complex has seen weakness this morning, with markets pricing in an Iran nuclear deal which appears close to being agreed.
- Treasuries fall as Greece’s Tsipras capitulated to creditor demands for immediate action to qualify for up to EU86b in aid Greece needs to stay in euro.
- There was no face-saving compromise on offer for Tsipras at a rancorous summit that ran for more than 17 hours and only established basis for negotiations on aid package which includes EU25b recapitalize banking system
- Conditions that Tsipras swallowed comprised a laundry list of unfinished business from Greece’s two previous bailouts, new demand for govt to transfer EU50b of state assets to a holdco that will seek to either sell or generate cash from them
- Dijsselbloem says proposed fund could include “airplanes, airports, infrastructure and most certainly banks”
- Greek parliament has until Wednesday to pass into key creditor demands into law, including broadening the tax base, streamlining VAT, curbing pension costs
- Two officials who observed Tsipras at the Brussels showdown independently described him as a “beaten dog”; Tsipras fretted privately about the reception that awaits him in Athens
- U.S. and Iranian diplomats are digging in over the last remaining issues holding up a nuclear deal, casting doubt on earlier optimism that an accord could be announced as early as Monday
- China’s small-cap CSI 500 Index rallied 6.2% for its best gain since November 2008; the number of halted companies fell by 408 from Friday to 1,045, or 36% of overall listings on mainland exchanges
- Yellen last week maintained her call for a rate hike this year as the U.S. economy improves; Humphrey-Hawkins testimony begins Wednesday
- Sovereign 10Y bond yields higher; Greek 10Y yield -163bp to 11.948%. Asian and European stocks, U.S. equity-index futures rise. Crude oil and gold fall, copper higher
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Every day is a great day to manipulate stocks higher and gold lower in the free and fair markets of the West.
Greece is learning about how markets operate - the banks always win:
If Greece had defaulted in 2010 when its debt was around 110 billion euros, the losses would have fallen on the banks that had foolishly lent the money without proper due diligence or risk management. This is what should have happened in a market economy: those who foolishly lent extraordinary sums to poor credit risks take the resulting (and entirely predictable) losses.
The Greek Government currently owes 323 billion euros — almost three times as much. The debt rose 213 billion euros, during 5 years of IMF-imposed “austerity” — the Greek depression
http://www.globalresearch.ca/how-fascist-capitalism-functions-the-case-o...
Forward.
China has lost over $3.5 TRILLION in less than a month, but thank god we've saved tiny little Greece? WTF?
No money was lost in China. It was harvested, by the oligarchs, from the muppets.
The news fixated on Greece gives the African free reign to make whatever deal he wants with fellow Musloms in Iran!
Brian Williams is now reporting the Chi-Com government is publicly flogging short sellers ;-)
Mid-evil stock market. "Bring out your dead, bring out your dead"
"with precious metals lower as a result of the Greek deal"
Come on ZH your own articles about JPM and CITI corners on the PM markets should render this statement at least ridiculous.
Anyone buying stocks & bonds now deserve what they're going to get.
I am so fed up with hearing what the f....g markets are doing. It's like mental water boarding.
APMEX still charging the same for a 10oz slv bar that they were 6 months ago.