Below trend growth to continue
We expected this week to be one of fast moving events, and that’s how it’s playing out. Greek PM Alex Tsipras has been speaking saying that he will do whatever he can to protect the Greek people
We expected this week to be one of fast moving events, and that’s how it’s playing out. Greek PM Alex Tsipras has been speaking saying that he will do whatever he can to protect the Greek people; the Greek Finance Ministry has been denying rumours that ATM withdrawals will be reduced from €60/ day to €20/day as Greek queued up get their €60.
The night seemed to start off with the inevitable claims and counter claims after the breaking off of negotiations late on Friday. But as the day unfolded at the start of the week, the Troika/Institutions (Greece’s creditors) appeared to be holding the olive branch out to Greece in an effort to get a last minute deal and forestall Greece’s exit from the Euro and a “no” vote at Sunday’s referendum. But even then, in the event of a “no” vote, is that to be interpreted as “no, we want out of the Euro”, or “no, we want a better deal than the one on offer but want to stay in the Euro”. Who’s to know? Uncertainty prevails. EC President Juncker was offering more conciliatory gestures, wanting to spell out in fact what seems essentially to still be on offer to Greece even after tomorrow that the creditors had said previously was the expiry date for last week’s offer. He also wanted to ensure Greek voters make an informed decision at the referendum.
There was even talk during the day of a group of Syriza MPs preparing to get a side deal done with the creditors by Wednesday and to propose forming a new unity government in an effort to ensure Greece remains in the EC and the Euro-zone. Even the IMF was holding out its own olive branch, saying that should Greece miss the payment Tuesday (highly likely), then it would be in arrears rather than default. Playing with words to some extent, but clearly a statement to diffuse tensions, calm investor sentiment and keep hopes alive that a deal might still be forthcoming with Greece before or after Sunday.
After yesterday’s equity market declines in Asia yesterday, it was replayed overnight, plus more in European and US markets with investors shying away from risk and plunging into bonds, the safe haven ones anyway. The German DAX fell 3.6% and periphery Euro markets were down as much as 5.2% in Milan. It was a similar picture in Euro bonds, German bunds rallying strongly, but the periphery selling off, Italian 10y +24bps. Currency markets have been an all-together different story. The AUD has held its composure, and the Euro has rebounded, trading at 1.125 this morning, after opening yesterday morning below 1.10. It remains to be seen whether that reflects more hope for Greece and the Euro. It’s a very partial and incoherent reaction across asset classes. LME copper rose.
If the market can re-focus at all from Greece today, there’s HIA New Home Sales report for May (L: +0.6%) this demand indicator coming before tomorrow’s Building Approvals report for May. Then there’s May RBA credit aggregates report, one that surprised on the low side in April growing 0.3% from a pull-back in each of components. We look for growth to increase to 0.4% in May; the market is looking for somewhat faster growth in the month of 0.5%.
Glenn Stevens is speaking later this afternoon on The Changing Landscape of Central Banking in London, at 6.40 AEST.
There is also the weekly ANZ-Roy Morgan Consumer Confidence indicator for last week, and for NZ, the ANZ Business Survey and NZ Credit Aggregates.
Aside from Greece, the preliminary EC June CPI is due (lower now after the low German read), while in the US, the focus will be on whether the Conference Board measure of consumer confidence matches the improved reading for June from the UoM survey and what the survey has to say about labour market conditions in terms of difficulty finding jobs ahead of Thursday’s payrolls report. The Chicago PMI is also due and expected to improve to 50, up from 46.2 in May.
Greece sees flight to quality in stocks and bonds: Eurostoxx 600 -2.7%, Dax -3.6%, CAC -3.7%, FTSE -2.0%. Dow -350 points to 17,596, -2.0%, S&P 500 -2.0%, Nasdaq -2.1%, VIX 18.85 +34.5%. Mumbai -3.3%, Nikkei 225 -2.4% and ASX 200 -2.2%; ASX SPI futures this morning -0.6%. US bond yields: 2s at 0.63% (-8), 10s at 2.32% (-15). WTI oil at $58.23 (-2.3%), Brent at $61.99 (-2.0%), Malaysian Tapis (yesterday) $62.76 (-1.7%). Gold at $1179.20/oz (+0.5%). Base metals: LME copper +0.6%, nickel -4.9%, aluminium -0.2%. Iron ore $61.3/t -1.2% Chinese steel rebar futures -3.5%. Soft commodities spot futures: wheat +2.6%, sugar +1.0%, cotton -0.4%, coffee -0.8%. Euro Dec 14 CO2 emissions at €7.37/t (-2.4%). The AUD/USD’s range overnight 0.7643-0.7712; indicative range today 0.7650-0.7725; the AUD/USD is 0.7680 now
German CPI (Jun) -0.1%/0.3% (L: 0.4%/0.0%; E: 0.5%/0.7%); US Pending Home Sales (May) 0.9% (L: +3.4%; E: +1.0%; Dallas Fed manufacturing (Jun) -7 (L: -20.8; E: -16)
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