Dueling Greece Plans Play Havoc with Markets

Economic Data

- (BR) Brazil Apr Industrial Production M/M: -1.2% v -1.4%e; Y/Y: -7.6% v -8.1%e
- (US) Redbook Retail Sales w/e May 29th: +1.7% y/y, May MTD m/m: -0.3%; May MTD y/y: +1.8%
- (SG) Singapore May Purchasing Managers Index: 50.2 v 49.3e; Electronics Sector Index: 49.8 v 49.5e
- (US) May ISM New York: 54.0 v 58.0e
- (US) Apr Factory Orders: -0.4% v -0.1%e; Factory Orders Ex-Transportation: 0.0% v -0.1% prior
- (US) Jun IBD/TIPP Economic Optimism: 48.1 v 49.8e

Both stocks and bonds are in the red this morning as the Greece negotiations enter their chaotic final stage. As of writing, the DJIA is down 0.15%, the S&P500 is down 0.21% and the Nasdaq is off 0.15%.

There are dueling Greek proposals out this morning, further muddying the waters over negotiations between Athens and its creditors. Last night, there were reports that Greece's major creditors met to draft a "final offer" to be presented to PM Tsipras. Rejection could put Greece in default. Meanwhile, the Greeks said they offered "realistic proposals" that included "tough compromises," however European sources suggested Athens offered no new concessions on pension and labor issues. After the US open, the EU's Dijsselbloem said creditors were still far from a deal with Greece.

The euro saw big gains on the impression that the end may be near in Greece negotiations, with EUR/USD soaring nearly three big figures over the course of the morning, rising from around 1.0930 to peak just shy of 1.1200 ahead of the US cash open. The pair has declined to 1.1119 as of writing. Bonds have sold off hard, with the 10-year bund yield up 16 basis points, the biggest intraday gain in nearly three years. The 10-year UST yield is up more than eight basis points to 2.261%. All other major European yields are soaring.

OPEC meets in Vienna later this week to debate what to do about oversupplied oil markets. Last November, the organization chose not to staunch the glut of supply and left production unchanged. Few changes are expected this week, and the OPEC meeting with Russia ahead of the formal conference may be the most consequential event. WTI crude is back above $60 this morning for the first time in more than a week. Brent is around $65.

May auto dales reports out of General Motors and Fiat Chrysler were better than expected, with totals growing 3% and 4% y/y, respectively. Both firms topped expectations, and GM had its strongest sales since 2007. Ford's sales also beat expectations, but fell 1.3% y/y, including a 9.7% y/y decline in the company's F-series trucks. On the sales call, Ford sales executives warned its inventory of F-150s was under pressure. Toyota and Nissan saw slight y/y declines, with sales in line with expectations.

Consumer names Cracker Barrel, PVH and Dollar General are gaining after decent quarterly earnings reports. PVH hiked its dividend and offered a one-time special dividend, while CBRL launched a big new capital return program. Profit from both names topped expectations. DG saw decent earnings and positive comps. DG and CBRL are up 4% a piece, while PVH is up nearly 9%.

Looking Ahead

- 16:30 (US) Weekly API Oil Inventories
- 17:00 (KR) South Korea May Foreign Reserves: No est v $369.9B prior
- 19:01 (UK) May BRC Shop Price Index Y/Y: -1.8%e v -1.9% prior
- 21:30 (AU) Australia Q1 GDP Q/Q: 0.6%e v 0.5% prior; Y/Y: 2.0%e v 2.5% prior
- 21:35 (JP) Japan May Services PMI: No est v 51.3 prior; Composite PMI: No est v 50.7 prior
- 21:45 (CN) China HSBC Services PMI: No est v 52.9 prior; Composite PMI: No est v 51.3 prior
- 22:30 (HK) Hong Kong May Services PMI: No est v 48.6 prior