Europe
If anyone were looking for evidence of the extent of the chasm between Greece and its creditors there can have been no better indicator than the time it took for talks to break down at the weekend when both sides tried to restart the negotiation process.
Irrespective of whom you believe the fact remains that the talks broke up in less than an hour, and the fact that neither side could agree whether the talks lasted 30 or 45 minutes, gives an indication of the huge divide, and the growing lack of belief that an agreement is either possible or even desirable.
Both sides continue to insist on their respective red lines and all the while the prospect of default looms ever larger, with European equity markets continuing their slow declines lower, with the FTSE100 hitting three month lows, and pushing below its 200 day MA for the first time since early January.
The worst performer on the FTSE100 is Standard Chartered (LONDON:STAN) Bank after a downgrade from Jeffries on concerns that the bank may have to cut its dividend in order to boost its capital ratios.
Also on the slide was Easyjet, also on the back of a downgrade, which dragged the rest of the sector down with it.
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US
US markets opened lower today taking their lead from today’s slide in European markets after talks between Greece and its creditors broke down yet again.
Stocks in focus today include Boeing (NYSE:BA) after the company announced it was in talks with potential buyers for its C-17 cargo planes. With the Paris Air show also getting under way this week we can expect other defence related stocks to come under the spotlight as companies look for new orders.
After a record busting weekend opening for Universal Studios latest blockbuster Jurassic World, studio owner Comcast could see a nice little bump higher on the open.
On the data front the latest Empire Manufacturing survey for June came back with a surprise slide into negative territory at -1.98, with new orders weak, and once again pointing to the schizophrenic nature of the US recovery story after last week’s largely positive data story.
Industrial and manufacturing production data for May wasn’t much better, both declining 0.2% and missing expectations of an improvement.
If investors were expecting a hawkish Fed this week then today’s data may well give them pause.
FX
Bond markets in the smaller European countries have also come under pressure as contagion effects ripple out from Greece, as the prospect of a default becomes ever closer. Portuguese, Spanish and Italian yields have all jumped sharply to their highest levels this year
Markets may have to temper their expectations of a hawkish Fed this week after the latest Empire manufacturing survey came in at a 29 month low of -1.98 and went into negative territory for the second time this year. The weakness of the survey was especially surprising given expectations had been for an improvement to 6 on May’s number of 3.09.
The pound has slid back a little ahead of a data heavy weak starting tomorrow with the latest inflation numbers for May.
The Swiss franc was the worst performer after import prices for May slid much more than anticipated in May.
The Australian dollar has been the best performer today, though that is probably as a result of some position squaring ahead of the release early tomorrow of the latest minutes from the most recent RBA meeting. There was some confusion about the central banks message earlier this month when they left rates unchanged but gave no guidance on its next likely move. The option was left open to further easing but the timing was rather open ended.
Commodities
Oil prices have come under pressure again today despite another reduction in rig counts on Friday. Despite the reduction in rig counts production still rose to a 30 year high, suggesting that the potential for further upside continues to remain limited, given OPEC’s recent decision to keep the taps open and not cut output.
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