Europe
Stocks in the Eurozone were mostly lower on Monday as fears re-emerged over contagion from Greek fallout; a lower euro however, cushioned the blow and helped the German DAX stock index to higher levels.
Peripheral government bonds yields were higher but the lack of participation from German bunds contained volatility and prevented broad-based deleveraging across other asset markets.
Greece and its creditors have been involved in a game of chicken which has now reached the peak of rush hour traffic. A letter that surfaced from Greek Prime Minister Tsipras to IMF Head Christine Lagarde admitted an inability to pay the previous 750bn euro loan repayment. It was only through the use of its IMF emergency account that it was paid, so the next payment due in June is crunch time. It now appears that this Greek crisis will have a resolution, either good or bad within the next month.
The UK’s FTSE 100 stumbled at the 7k level for a fourth day. Post-election gains have failed to gain much traction and as time passes, there is an increasing risk that the correction from the April highs has further to go.
The EU referendum has been an overhang since The Conservative Party election win so Andy Burnham, frontrunner to become leader of The Labour Party saying he would demand it took place in 2016 if he becomes party leader, has caused some jitters in markets.
Marks & Spencer climbed to its highest in eight years after a report that it may announce a special dividend while shares of BHP Billiton (LONDON:BLT) slipped 5% as the IPO of its spin-off, South32 saw tepid investor demand
US
The Dow Jones traded briefly above its record intraday highs before slipping back as concerns over the situation in Greece and a spike in US yields took hold. The higher US treasury yields coincided with those in the UK and the Eurozone periphery over the impact of a seemingly inevitable Grexit.
Alibaba (NYSE:BABA) shares were down over 1.5% on news it is being sued again by luxury fashion group Kering (PARIS:PRTP), which includes well known brands Gucci and Yves Saint Laurent over the sale of counterfeit goods.
FX
The US Dollar strengthened ahead of Fed minutes this week in what was more of a technical correction from overextended levels in the euro and British pound.
The euro saw a bout of selling both against the pound and the euro on Greek fears while the confused picture of better employment data and a dovish bank of England left the British pound susceptible to selling against the dollar.
The Canadian dollar was especially weak amidst signs the rally in oil prices could be topping out. USDCAD was up over 1% having failed on three occasions to drop beneath 1.1950
Commodities
Crude oil prices dropped further on Monday after Baker Hughes rig count data on Friday showed the smallest decrease in US rigs since December in signs that higher prices have prompted US producers to hold out. OPEC shows no sign of letting up in its own fight for market share with IEA data indicating the biggest production increase in April since September 2012.
Gold and silver prices demonstrated significant strength, breaking to three month highs despite a stronger US dollar. The breakout may not be reliable though. The volume of gold transferred between banks has dropped to a 12-month low according to the FT citing LBMA.
Gold market liquidity is drying up so breakout moves get exaggerated on what is low volume by historical standards. The market is going through a shift whereby major players that might have once sustained a breakout including institutional funds and central banks are not there, but have been replaced to some degree by algorithms trading around technical price levels.
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