Morning Roundup – Greece Edition

By Mark Masterson on June 29, 2015

Good morning,

Below are the news items moving markets today…..

Executive Summary:

Global markets suffered a volatile overnight session as all eyes remain on Greece.  In a surprise move, Greece announced a July 5^th referendum this past Friday.  Greece is taking the bailout culture to the people for a vote.  The Greek government is recommending a “no” vote on the bailout.  The ECB then froze the ELA (emergency funding facility) at the current level of 89 billion Euro’s.  This in turn forced Greece to close all the banks (declare a bank holiday) and also close the Greek stock market for the entire week to avoid a major meltdown.  The banks also will likely be closed through July 5^th.  This leaves the Greeks will little access to money as even the ATM’s – at least those that are not empty – have limits on how much cash you can take.

The ECB is meeting on Wednesday and could consider raising the ELA then, and the pressure on global markets is expected to bring the parties back to the negotiating table.  (which is the exact intent of the Greek referendum.  Cause pain in Europe, and European leaders will fold)  This referendum is also a vote for or against the current Greek leadership.  A “yes” vote for the bailout will likely mean Tsipras will step down and form some kind of unity government.  A “no” vote (against the bailout) will increase the mandate of the current government and provide confidence to leadership to demand loan concessions.

Below are a few articles on the situation:

• GOLDMAN: Today’s Greek mess won’t get as bad as the euro crisis of 2011-2012 http://read.bi/1C0WmfP 
• German banks: We’re prepared for Greek financial fallout because ‘we’ve been anticipating this for a long time’ http://read.bi/1C0NDtY
• EU’s Juncker to Greece: Don’t commit suicide
• Greece: Uncertainty reigns after referendum gamble
• As referendum looms, many in country hoard groceries, gas…
• Fears of Grexit Grow…

The Euro opened sharply lower last night, but has almost filled that gap lower as central banks – particularly the Swiss National Bank, are really working overtime to contain and stabilize the currency moves.  The Bank of Japan overnight said that if they see any notable contagion, their response will be to add/inject liquidity…..read that as print and prop up bond and equity markets.  As noted below, the Central bank of China dropped rates over the weekend and will continue to support markets through the volatility.  The ECB is on high alert.  So, where is the Fed?  No idea.  I suppose they are still thinking of ways to raise rates in this environment?  Probably not a great idea.

Meanwhile in China, the PBoC (Central bank of China) announced both a one year lending rate and deposit rate to be lowered by 25 basis points.  The goal is clearly to stabilize the equity market which has been very volatile the past week.

Not that many eyes will be on the US economic calendar over the next few days – but below is a summary of what lies ahead….

Economic Calendar

• Pending Home Sales (Mon
• Dallas Fed Manufacturing Activity (Mon
• S&P/Case-Shiller Home Price Index (Tues):
• Chicago Purchasing Managers Index (Tues):
• Consumer Confidence Index (Tues):
• Vehicle Sales (Wed):
• ADP Employment Change (Wed): Employment is what to watch for further Fed hints.
• Markit US Manufacturing PMI (Wed):
• Construction Spending (Wed):
• ISM Manufacturing (Wed):
• Initial Jobless Claims (Thurs): Economists estimate initial claims increased to 270,000 from 271,000 a week ago.
• The Jobs Report (Thurs): Economists estimate US companies added 230,000 nonfarm payrolls in June, bringing the unemployment rate down to 5.4%. Average hourly earnings are estimated to have increased by 0.2% month-over-month in June, or 2.3% year-over-year.
• Factory Orders (Thurs):

Articles of Interest:

• China’s Stocks Enter Bear Market as Rate Cut Fails to Stop Rout (BBG)
• Stocks Tumble Around the World on Greek Crisis (WSJ)
• Some say back to the drachma for a Greek reboot (Reuters)
• Greece Imposes Capital Controls as Fears of Grexit Grow (BBG)
• Panic Sets in Among Hardy Hedge Fund Investors Remaining in Greece (NYT)
• Euro off Greece-driven lows after SNB intervenes (Reuters)
• Western Union to close in Greece for rest of week (Reuters)
• European banks, bonds shaken by Greek turmoil (Reuters)

Charts of the day:

Quote of the day:

Just do what you do best. –

Red Auerbach (Basketball coach)