Continuing Deadlock over Greece Rattles Markets Badly

June 4, 2015

Ten-year sovereign debt yields rose 8 basis points in the U.K., 5 bps in Germany, and 4 bps in Japan.  Futures put the 10-year Treasury at 2.42%, which like its German counterpart of 0.93% is at a new high for the year.

Share prices are down 2.6% in Greece, 1.8% in France, 1.7% in Germany, 1.5% in Italy, Spain and the U.K. and 1.3% in Switzerland.  Equities fell 1.0% in India, 1.4% in Australia and 2.2% in Taiwan, but Japan’s Nikkei firmed 0.1%.

The dollar is currently down 0.6% against the euro after touching 1.1380.  The greenback also shows overnight losses of 0.5% against the Swiss franc , 0.4% relative to sterling, and 0.2% vis-a-vis the yen, but rose 0.4% against the Aussie dollar.

West Texas Intermediate oil dropped 0.5% to $59.33 per barrel.  Comex gold at $1,184.40 per ounce is steady.

Prime Minister Tsipras of Greece failed to budge from yesterday’s proposal to Greek creditors, rejecting a plan that imposes additional austerity on Greek citizens.

The Central Bank of Brazil’s monetary policy committee, Copom, hiked the Selic interest rate by another 50 basis points to 13.75%.  This was the sixth consecutive meeting to tighten.  Prior to late October 2014, the rate was at 11.0%, and the pre-April 2013 trough had been at 7.25%.  Brazil is both in recession and experiencing decade-high inflation.

Euroland’s retail purchasing managers index rose 1.9 points to a 49-month high of 51.4 in May, thanks to a 3.2-point increase in the German retail PMI to 55.8.  The French and Italian retail PMIs remained below the 50 no-change level at 48.7 and 48.3 despite advancing to their highest readings in 11 and 10 months, respectively.

Ireland’s services purchasing managers index climbed 0.8 points to a 3-month high of 61.4 and was accompanied by the best business sentiment sub-index in 15 months.

The German construction PMI dipped 0.2 points to a 4-month low of 50.8.  The reading on input prices had the lowest reading in 17 months.

Australian retail sales stagnated in April, missing street expectations for a rise.  Sales were 4.4% higher than in April 2014.  The Aussie trade deficit widened more sharply than forecast in April, printing at A$ 3.888 billion after deficits of A$ 1.231 billion in March and $1.591 billion in February.

Finnish real GDP posted a quarter-on-quarter dip of 0.1% in 1Q, the same result as in the last two quarters of 2014.  GDP was unchanged from the first quarter of last year.  Dutch consumer price inflation nearly doubled to 1.1% in May.  Prices rose 0.2% on month.

The Bank of England and Bank of Mexico are scheduled to make interest rate announcements later today; neither is expected to change policy.

Scheduled U.S. data releases today are quarter productivity and unit labor costs as well as weekly jobless insurance claims.  The Canadian IVEY-PMI report also arrives.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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