Another Ultimatum in the Continuing Greek Standoff
July 8, 2015
Eurozone political leaders set this coming Sunday, July 12, as a final deadline for settling the Greek situation one way or another. By then, the Greek government must submit their plan of fiscal reforms, and EU leaders will decide if such can be accepted.
Political events such as this game of high brinksmanship are very hard to predict. It looks to me at this juncture like there will not be a deal, and Greece will go its own way. Financial markets remain hopeful, nonetheless as attested by share price advances so far today of 1.1% in Italy, 0.6% in France, the U.K., and Switzerland, 0.5% in Germany and 0.3% in Spain. Moreover, 10-year sovereign debt yields are down nine basis points in Portugal, 4 bps in Italy, and 2 bps in Spain while firming 2 bps in Germany and a basis point in Great Britain.
The mood in Asia, where panic about China continues to build, was very negative today, in contrast. Despite newly announced additional steps to stabilize the Chinese market, the Shanghai Composite dived to an 8% drop early in the day and closed down 5.9%. Other stock market indices fell even more sharply. Equities elsewhere in the Pacific Rim fell by 3.1% in Japan, 6.3% in Hong Kong, 3.0% in Taiwan, 1.7% in India and Singapore, 2.0% in Australia, 0.7% in Indonesia and 0.6% in New Zealand.
Ten-year sovereign debt yields plunged 16 basis points in Australia. A drop at the open in the 10-year U.S. Treasury yield is implied by futures trading.
Comex gold is steady at $1,154.95 per ounce. West Texas Intermediate crude oil has firmed 0.6% to $52.63 per barrel.
The dollar declined overnight by 0.8% against the yen and kiwi but has advanced by 0.7% relative to sterling, 0.5% vis-a-vis the Swiss franc, 0.2% versus the Aussie dollar, and 0.1% against the loonie and euro. The yuan is flat.
Japan’s unadjusted current account surplus in May printed at JPY 1.881 trillion, 3.67 times bigger than the surplus in May 2014. Imports sank 10.3%, while exports edged just 0.1% lower on the year. The seasonally adjusted current account widened 28.4% from JPY 1.274 trillion in April to JPY 1.636 billion in May. All these results surpassed analyst estimates.
Japan’s economy watchers index, a gauge of service sector worker perceptions, fell 2.3 points to a 4-month low of 51.0 in June. The “outlook” index fell a whole point. Both readings were below expectations.
Japanese bank lending grew 2.5% in the year to June, least since the year to February. Bankruptcies in June were 4.7% smaller than a year earlier.
The British Halifax house price index leaped 1.7% on month in June, lifting the 12-month rate of increase to a nine-month high of 9.6% from 8.6% in May and 7.8% in December 2014. Britain’s shop price index fell 1.3% in the year to June after a 1.9% 12-month decline in May.
The Bank of France’s index of French manufacturer confidence unexpectedly dipped a point to a reading of 98 in June. Central bank authorities revised projected 2Q GDP growth down 0.1 percentage point to just 0.2% as a result.
Finland’s trade surplus in May of EUR 425 million was 46.6% greater than a year earlier. The January-May trade surplus of EUR 345 million contrasts with an EUR 985 million deficit over the first five months of 2014. The Greek trade deficit of EUR 1.25 billion in May was marginally larger than April’s shortfall.
Consumer prices rose 0.6% in Hungary between June 2014 and June 2015. Turkish industrial output growth slowed to 2.4% on year in May from 3.9% in April.
In this light day of data reports, the U.S. highlight of the day will be the publication of FOMC minutes, although crude oil inventories, a weekly report, will also draw market interest. Canada releases building permits.
Copyright 2015, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Greek debt crisis, Japanese current account, Shanghai composite