Quick Recap
So Greece has defaulted. The EU emergency packages and any further chance of IMF aid are now gone unless Greece clears its arrears
The EU emergency packages and any further chance of IMF aid are now gone unless Greece clears its arrears. It’s uncharted territory for the EU and something that hardly anyone thought possible just a week or so ago.
What is apparent though, or what is becoming apparently, is that Marc Chandler’s characterisation of Alexis Tsipras and his government as ‘inexperienced’ over the weekend has proved prescient. Last night the Greek PM made a surprise bid for another extension and a $29 billion dollar rescue plan. But German Chancellor Angela Merkel said no deals until after the referendum. Tsipras has staked his future on the referendum and this US hedge fund manager thinkshe’ll be gone in 30 days. A master-stroke or an overplayed hand? We’ll know soon enough.
Interestingly though – even though the deadline is past for the repayment to the IMF and it’s widely recognised Greece has defaulted that’s actually not the case. My colleague at Business Insider, David Scutt, explores this arcane world here.
The impact of Greece was limited however. Sure European stocks fell again but that’s as much technical as anything else. US stocks recovered and then sagged but finished in the black after President Obama said Greece was factored into the markets.
Certainly what we know about Greece currently is priced in as the stability of USDJPy over the past couple of days suggests. The past 24 hours move in the Euro was largely a normal reaction after Monday’s gap was filled and we now wait for the next shoe to drop. For the Aussie we get some important data this week and then of course non-farm payrolls from the US a day early on Thursday before the 4th of July weekend.
So we have a busy few days ahead of us yet.
On the day
On the data front today it’s Markit manufacturing PMI day. We get releases from China, Japan, Europe and the Americas. We also get the Australian version from the AiGroup. Also out in Australia are building approvals. In the US tonight we get ADP and Challenger jobs series before non-farms tomorrow night. We also get the big daddy of PMI’s the US ISM.
Here’s the overnight scoreboard(7.16am AEST):
- Dow Jones up 0.13% to 17,619
- Nasdaq up 0.57% to 4,986
- S&P 500 up 0.27% to 2,063
- London (FTSE 100) down 1.5% to 6,520
- Frankfurt (DAX) down 1.25% to 10,944
- Tokyo (Nikkei) up 0.63% to 20,235
- Shanghai (composite) up 5.55% to 4,277
- Hong Kong (Hang Seng) up 1.09% to 26,250
- ASX Futures overnight (SPI September) -30 points to 5,366
- US 10 Year Bonds +2 points to 2.35%
- German 10 Year Bonds -3 to 0.77%
- Australian 10 Year Bonds +5 points to 3.05%
- AUDUSD: 0.7703
- EURUSD: 1.1132
- USDJPY: 122.48
- GBPUSD: 1.5705
- USDCAD: 1.2484
- Crude: $58.98
- Gold: $1,172
- Dalian Iron Ore (September): 417
CHART OF THE DAY: The DAX
You know – I looked at all of the markets I follow and nothing jumped out of me. That’s the first time in ages, almost ever that I have had that happen.
That suggests a warning to me that something is about to break wide open. Sure you could argue that after charting so nicely for months now markets have found a level as President Obama suggested. Equally you could argue that after the recent volatility has washed a lot of opportunities out of the market. Both would be true…But I stand before you, or at least my words do, ready for a surprise, a break and a run in markets.
Short USDJPy is my favourite trade just now – or using options which is the way wholesale traders will be approaching markets at present.
Anyway to the DAX. You can see the conundrum. Uptrend broken, support found, rally to dual resistance, pullback, indecision.
On the weeklies I still favour lower levels.
But the DAX is a nice summation of many markets at the moment.
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EUR/USD now refocuses on the 200-day SMA
EUR/USD extended its positive momentum and rose above the 1.0700 yardstick, driven by the intense PMI-led retracement in the US Dollar as well as a prevailing risk-friendly environment in the FX universe.
Gold struggles around $2,325 despite broad US Dollar’s weakness
Gold reversed its direction and rose to the $2,320 area, erasing a large portion of its daily losses in the process. The benchmark 10-year US Treasury bond yield stays in the red below 4.6% following the weak US PMI data and supports XAU/USD.
Bitcoin price makes run for previous cycle highs as Morgan Stanley pushes BTC ETF exposure
Bitcoin (BTC) price strength continues to grow, three days after the fourth halving. Optimism continues to abound in the market as Bitcoiners envision a reclamation of previous cycle highs.
US versus the Eurozone: Inflation divergence causes monetary desynchronization
Historically there is a very close correlation between changes in US Treasury yields and German Bund yields. This is relevant at the current juncture, considering that the recent hawkish twist in the tone of the Federal Reserve might continue to push US long-term interest rates higher and put upward pressure on bond yields in the Eurozone.