Naturally, in the aftermath of the Greece referendum on the bailout producing such a decisive “no” vote to European creditor bailout terms, that was always going to be the main talk across news and wire services overnight.  But the price action in response from the Euro and European equities has been relatively orderly, and in the case of FX, muted.  The Euro for example closed last week at 1.11, opened yesterday morning below 1.10, has since recovered to be in the middle of that range.  Likewise, the AUD has been mostly hugging 0.75 in the past 24 hours. The Eurostoxx 600 index lost more ground, down 1.24% with peripheral markets taking more of a hit, Milan down 4.0% on the day.  Likewise, peripheral bond yields rose in a risk-off market mood, 10y Italian, Spanish and Portuguese yields up between 14-24bps, though that was outflanked by a 346bps rise in Greek bonds, jumping to news that the ECB had increased the haircuts on Greek sovereign collateral pledged against the ECB’s Emergency Liquidity Assistance to Greece that was held steady at €88.6bn as European Leaders’ meetings kicked off the week in an effort to strike a deal with Greece.  In its statement, the ECB said that it is reviewing the situation closely, it will review the ELA again Wednesday as Greek banks remained shut until Wednesday to stem bank deposit outflows.

German Chancellor Merkel and French President Hollande met at the Elysse Palace ahead of Tuesday meetings of EuroGroup Finance Ministers and Heads of State.  In a conciliatory gesture, the antagonistic Greek Finance Minister Yanis Varoufakis fell on his sword early Monday to defuse some negotiating tensions.  He’s being replaced with the less aggressive Euclid Tsakalotos.  Wire services report such comments out of the Merkel-Hollande meeting as “doors remain open”, but that “time is running out”.

The bigger price action came in the commodity space overnight with oil, metals and iron ore all down sharply.  Oil markets have been eyeing potential new Iran supply with on-going nuclear talks with Iran in Vienna, but these commodity moves have global growth concerns written all over them, and won’t be lost on the RBA Board today, and with the AUD unmoved overnight.  (The CAD and the NOK both weakened.)  Brent was down a cool $3.52 (-5.84%), LME copper by 2.93% and spot Qingdao iron ore by $2.98/t to $52.28, off 5.39%.  Chinese steel rebar futures fell 2.7% yesterday.

Coming up today/tonight

The RBA Board is meeting this morning and will get an update on the somewhat more positive but still choppy performance of the local economy.  The Board will no doubt get a briefing from Bank staff on evolving Greek developments, how they are and are not impacting global markets but closer to home, Chinese developments, including a softer economy and last week’s announcement to prop up the stock market that had some success yesterday.  Developments such as in overnight commodity markets and continued house price gains in Sydney and Melbourne can only leave the RBA with the stronger impression that the exchange rate/interest rate mix is more out of kilter.  Expect more words to the effect today about the further exchange rate declines being likely and necessary, perhaps with more volume dialled in.

First up this morning is the NZIER Business Opinion Survey (8.00 AEST), followed by the weekly ANZ-Roy Morgan Consumer Confidence Survey that’s held up well since the Budget.  We also have the AiG PCI Construction index for June (L: 47.8) and May Overseas Arrivals and Departures, another monthly update on Australia’s tourism flows and net immigration contribution to slowing population growth.

There’s little scheduled data that will deflect attention away from tonight’s EU Fin Min and Leaders’ meetings with German/UK industrial production, US/CAD trade and US JOLTs Job Openings.

Overnight

Industrial commodities take a big hit: Eurostoxx 600 -1.2%, Dax -1.5%, CAC -2.0%, FTSE -0.8%.  Dow -47 points to 17,684, -0.3%, S&P 500 -0.3%, Nasdaq -0.4%, VIX 17.01 +1.3%.  Mumbai +2.4%, Nikkei 225 -0.3% and ASX 200 -1.1%; ASX SPI futures this morning +0.3%.  US bond yields: 2s at 0.59% (-4), 10s at 2.29% (-10).  WTI oil at $52.71 (-7.4%), Brent at $56.76 (-5.9%), Malaysian Tapis (yesterday) $60.60 (-4.3%).  Gold at $1169.50/oz (+0.5%). Base metals: LME copper -2.9%, nickel -2.5%, aluminium -0.9%. Iron ore $52.3/t -5.4% Chinese steel rebar futures -2.7%. Soft commodities spot futures: wheat +0.8%, sugar +1.5%, cotton -0.7%, coffee -1.8%.  Euro Dec 14 CO2 emissions at €7.39/t (-0.8%). The AUD/USD’s range overnight 0.7484-0.7533; indicative range today 0.7455-0.7525; the AUD/USD is 0.7496 now

German Factory orders (May) -0.2%/4.7% (L: 1.4%/0.4%; E: -0.1%/4.1%); US ISM Non-Manufacturing (Jun) 56.0 (L: 55.7; E: 56.4; Labour Market Conditions Index (Jun) 0.8 (L: 1.3; E: 2); Canada’s Ivey Manufacturing PMI 55.9 (L: 62.3; E: 56.0)

For full analysis, download report:

• Markets Today 7 July 2015 (PDF,542 KB)

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