Europe
European stocks rebounded on Tuesday, showing relative calm in the face of increasing risk of a ‘Grexit’. There is now a sense of acceptance that Greece will not get an extension of its bailout program and is going to miss its IMF payment deadline on Tuesday. It is just optimism that a missed payment doesn’t mean a deal can’t eventually be reached keeping markets afloat.
Greece has requested a new 2-year bailout program from the ESM so an extraordinary Eurogroup teleconference has been setup for 6pm BST tonight to discuss it. Given comments from Germany’s Angela Merkel that there will be no more developments on Greece today, chances of a loan being signed off are low. Even more unlikely is that a law could be drafted and passed in six Eurozone parliaments before the IMF payment is due five hours later.
German finance ministry have stated that Greece’s debt crisis poses little threat of contagion to the German financial system, but then, they would say that.
UK economic growth was revised higher for the first quarter to 0.4% from 0.3%, mostly due to a change in calculation for the construction sector according to the ONS. Business investment is rising and domestic demand is growing thanks to high employment and improving real earnings. Exports continue to disappoint with the British pound at a seven-year high versus the euro.
Having lost close to 400 points in the past three trading days, sentiment has been severely dented in the FTSE 100, which is now trading close to negative territory for 2015. It was a sea of red on Tuesday with supermarkets Sainsbury’s and Tesco (LONDON:TSCO) leading the declines. Hikma Pharmaceuticals (LONDON:HIK) was one of the few bright spots on news the company has made a bid for German rival Boehringer Ingelheim's generics unit Roxane Labs.
US
US markets made a strong open on Tuesday but gave back gains after strong consumer confidence and housing data increased the likelihood of higher interest rates this year, while concerns remained over the fate of Puerto Rico.
Consumer confidence beat expectations in June coming in at 101.4 when 97.1 was expected, up from 95.4 in May. The Case-Shiller home price index hit its highest level since 2008.
Puerto Rico’s president announcing that the country cannot afford to pay its $72bn in debt was a reminder that it’s not just external debt problems that can destabilise US markets. The United States central government has ruled out a bailout and the US territory is not a municipality so cannot restructure its debt with formal bankruptcy.
Apple (NASDAQ:AAPL) share were up 0.5% in early trading on the day its music streaming service goes live.
Shares of newly-listed Fitbit Inc (NYSE:FIT) were up over 6% after new coverage from a broker suggested the company was gaining market share in the growing wearable fitness market.
FX
The US Dollar was mixed on Tuesday as consumer confidence and housing data impressed but some safe haven flows into the greenback were reversed from Monday.
The British pound saw strong gains versus the euro but was near flat against the dollar after the higher revision to first quarter UK economic growth.
The euro slipped back on Tuesday as it became clear that Greece’s current bailout program would expire with Athens requesting a new 2 year program.
The New Zealand dollar was one of the biggest losers in currency markets after a sharp drop in business confidence and a disappointing monthly decline in new home sales that may spur another rate cut from the RBNZ.
Commodities
Crude oil prices rose alongside global risk sentiment on Tuesday while reduced demand for safe havens sent gold and silver lower.
CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.