Spreadex Market Update
Crunch day #1,059,723 with Eurogroup meeting and EU summit on agenda
In a way it feels as if the last 9 days of referendum madness haven’t happened. The same red lines, the same creditor factions and the same group of people (if you switch Tsakalotos for Varoufakis) remain at the centre of this Greek saga, just in a more pronounced fashion. The fractures in the Eurozone appear to be deepening, with a growing schism between those in the Eurozone who increasingly want a deal (France, Italy) and those who are keen to let Greece leave (Germany, reportedly leading the opinion of 16 of the 18 countries in the region). Following the referendum result it will be interesting to see how much of today’s discussion will be about whatever new proposal Tsipras submits, and how much is about trying to mitigate the consequences of a Grexit.
Greece appeared to be nudged a bit further in that latter direction last night, as the ECB decided to tighten the screws on the Greek banks by choosing to maintain, not increase, its ELA at €89 billion. This leaves the already sickly Greek institutions on a life support machine that is slowly being turned off. It also puts in further doubt Greece’s ability to make its €3.6 billion ECB repayment on July 20th, something that, if missed, would carry much harsher consequences that the IMF default at the end of June. Regardless, the Eurozone indices have seen a minor influx of optimism this morning, likely a mixture of correcting some of yesterday’s losses combined with whatever remnants of hope exist in the unhappy region.
Whilst the Eurozone basks in its likely brief foray into green, the FTSE was fairly flat after the bell with continued issues in the commodities sector weighing on the UK index. A failure by premier Li Keqiang to address the growing market crisis in China last night had further negative ramifications for copper, with the metal continuing Monday’s severe declines this morning; Brent Crude, meanwhile, yesterday saw its second worst one-day fall of 2015. Strong manufacturing and industrial production figures could help lift the FTSE in the right direction, but they will be combating a tough economic landscape.
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