Europe
European stocks opened sharply lower on Monday after 60% of Greek voters shocked financial markets by rejecting the latest bailout terms from the country’s creditors. The spreads on government yields widened as investors flocked to the safety of core German bunds while selling bonds from the likes of Spain and Portugal.
By mid-morning in Europe, markets were not looking as bad as they started, helped by news that Greece’s outspoken finance minister Yanis Varoufakis would step down. Varoufakis stepping aside could help ease the tension in negotiations over a bailout deal following the referendum.
Following the ‘No’ vote, the chief worry is over the liquidity of Greek banks. Markets could get soothed or agitated later on Monday when the European Central Bank announces its plans for emergency lending to Greek banks. Most likely, the ECB will try to remain as apolitical as possible by maintaining the ELA at current levels rather than ending it or extending it based off of the referendum. However, its hand may be forced into the direction of ending it, should Greece miss its payment to the ECB on July 20. This makes July 20, Greece’s next big deadline.
Volatility in Chinese equities is hardly spurring bullish sentiment across global equities, even for those with no exposure. The Chinese government instituted a plethora of stock market reforms designed to sure up confidence. Still, Chinese stocks finished well off their highs as investors scramble to use any bounce in prices to sell stocks.
Banks led the declines on the FTSE with RBS (LONDON:RBS) and Barclays (LONDON:BARC) both lower by as much as 2%. The chance of a Grexit and the associated threat of financial contagion have increased dramatically after the ‘No’ vote in the referendum.
Shares of Rolls Royce Holdings plc (OTC:RYCEY) motored lower on Monday after the company released its third profit warning in 18 months. The UK engineering company has cited trouble in its marine division because of lower oil prices and reduced demand for business jets and the Airbus A330 for which it makes the engines.
FTSE 250 house builder Bovis Homes Group (LONDON:BVS) shares got a boost after management announced a 14% rise in its interim dividend after the company delivered a record number of first-half legal completions.
US
US stocks followed European markets to a lower open on Monday after Greece voted an overwhelming ‘No’ to the latest proposals for economic reforms from the country’s creditors.
Financial conglomerates including JP Morgan Chase (NYSE:JPM) and American Express (NYSE:AXP) were some of the worst performers on the Dow Jones Industrial Average over threat of financial contagion from Greece.
Shares of healthcare insurer Humana traded higher on Monday with the market able to react to the takeover from rival Aetna on Friday.
Shares of discount retailers Family Dollar Stores Inc (NYSE:FDO) stores and Dollar Tree Inc (NASDAQ:DLTR) were higher on Monday after the US Federal Trade Commission approved the merger of the two after a year-long review.
FX
The US Dollar was broadly higher on Friday as the market sought safety in US assets. The ‘No’ vote in the Greek referendum increases the odds of a Greek exit and by its nature, increases the odds of the eventual breakup of the euro.
The euro gapped lower on Sunday after news that preliminary results in the Greek referendum leant heavily to the No’s. The single currency recovered on Monday after Greek finance minister Varoufakis left his position at the finance ministry, increasing hopes of easier negotiations towards a deal.
The Mexican peso hit a new record low on Monday after the Greek voting results. The Peso has weakened on the prospect of rising rates in the US, its biggest trading partner and as an oil exporter Mexico has lost revenue from the fall in oil prices.
Commodities
The price of copper alongside other base metals got slammed lower on Monday. Demand for copper from China will probably slow at an even faster rate now that the country has a bursting stock market bubble as well as a housing market slowdown.
Crude oil saw substantial losses on Monday with the Brent contract down over 2.5% on expectations of slowing demand from Europe in the event of a Grexit and higher supply given progress at the Iran nuclear talks. WTI crude continued its slide from Friday when it was reported that the number of US oil rigs rose for the first time since December, increasing upward pressure on US oil production.
Gold prices were modestly lower despite all the risks associated with a possible Greek exit from the Eurozone and Chinse stock market crash. Gold is likely to trade in tight ranges ahead of the FOMC minutes on Wednesday, which could offer a clue on the timing of any US rate hike.
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