GDP growth is widely expected to be revised higher

Market Movers

• Greece continues to be in the spotlight with today’s extraordinary Eurogroup finance ministers meeting (starts at 19:00 CET). The aim of the meeting is for the Eurogroup to reach a deal, which can be signed by the EU leaders at the two-day summit this Thursday and Friday.

• The heads of the ‘Institutions’ (IMF, ECB and EU Commission) will meet at 12:00 CET according to an unnamed EU official. It has also been said that Greek Prime Minister Tsipras may participate in the meeting. The Institutions are currently considering whether the latest reform proposal from Greece is comprehensive enough and any information about how close we are to a deal will be followed closely.

• German Ifo expectations will get some attention as the German manufacturing PMI surprised on the upside yesterday, whereas the ZEW expectations suggest a decline in Ifo expectations. We stick to our forecast that the Ifo expectations will decline as the actual situation in Germany has improved, implying the outlook will not continue to look even better. However, it is not likely to have any market implications as long as the Greek situation remains unsolved.

• In the US the second revision of Q1 GDP data is released. GDP growth is widely expected to be revised higher but will continue to show contraction in the first quarter.

• In the Scandi markets focus will be on Norwegian unemployment, see page 2.

Selected Market News

In Greece the likelihood of a deal has increased but there is still a risk that Greece will miss its EUR1.6bn loan repayment to the IMF on 30 June. In case the EU leaders sign off on a deal at the end of this week, Greek lawmakers are required to approve the measures over the weekend before the German parliament must agree on the deal in the beginning of next week – just before the IMF payment due on Tuesday. However, the Institutions will not disburse the EUR7.2bn trance before Greece has actually implemented the agreed reforms stretching the timeframe into July.

IMF director Christine Lagarde has expressed a very tough stance recently and does not seem willing to accept a delayed payment from Greece. However, a missed payment to the IMF would not be characterised as a default by e.g. S&P and the end-June deadline is political as no bond is set to expire. Having said this, a missed payment could have implications for ECB’s ELA facility, which is currently keeping the Greek banks alive.

Focus is now also shifting towards the internal political situation in Greece as a deal with the creditors needs to be approved in the Greek parliament. Here, it might be hard for Tsipras to find the political support for the Greek concessions from the radical members of the governing Syriza party. According to a government spokesman Tsipras could be forced to resign without a parliamentary majority.