Europe
European markets have remained under pressure today as investors continue to absorb last nights unexpected departure, stage left of the IMF from the Greece debt talks.
While EU officials have insisted that the IMF is still engaged and ready to come back to the table as soon as circumstances dictate, the fact remains that the atmosphere is remarkably different today to this time yesterday. Eurogroup chief Dijsselbloem’s reported comments that Greece doesn’t have a choice in rejecting the options on offer aren’t the sort of remarks guaranteed to illicit a positive response.
So we come to the end of what could have been a generally positive week, but has now taken an unexpectedly negative turn, with just as much uncertainty as we had a week ago, and the increased likelihood that we will see a Greek default by the end of the month.
Greek officials have issued soothing comments about hoping to reach a deal by next week’s 18th June Eurogroup finance ministers meeting, but the various parties need to be talking for that to happen, and at this point in time this seems unlikely, unless events move swiftly over the weekend. Time is running short to get a disbursement signed off by next week’s 18th June Eurogroup meeting and if there is no progress next week then Greece is unlikely to be able to pay the IMF.
The worst performing sector today has been the oil and gas sector on the back of weaker Oil prices with Royal Dutch Shell (LONDON:RDSa) leading the way.
On the plus side after the heavy falls of yesterday Royal Mail (LONDON:RMG) shares are bouncing back after the announcement of the government’s disposal of half its remaining stake in the company.
US
US markets opened lower today after two days of strong gains with investors remaining increasingly uncertain about the next move. After six months of essentially treading water indications are no clearer as to how strong the US economy is, and with uncertainty about what could happen next in Greece it would appear that discretion is the better part of valour, with stocks ending the week on the back foot.
Yesterday’s retail sales data was encouraging in terms of the upward revisions but PPI data released today showed that inflationary pressures continue to remain benign. What inflation there was reflected in a move higher in gasoline prices, but on an annualised basis prices came in weaker again, rising 0.6%, below expectations of a rise of 0.7%.
On the companies front Twitter (NYSE:TWTR) is in the spotlight after last night’s surprise resignation of CEO Dick Costolo, and his subsequent replacement by Jack Dorsey, the co-founder of the social media network.
FX
The euro took a bit of a tumble today after German Chancellor Angela Merkel took the unusual step of commenting on the level of the currency, saying it was too high for countries like Spain and Ireland, which in turn made it harder for governments to implement reforms.
It is highly unusual for politicians in Europe to comment on the value of the euro without being slapped down by the ECB and Mario Draghi in particular. He’s never particularly welcomed interventions from French and Italian politicians in the past when they have complained about the value of the currency and these interventions were made when the euro was much higher than it is now.
We’ve now had four interventions on the subject of currency strength this week, from Japan’s Kuroda, and Australia’s Stevens, as well as reported comments from President Obama which suggests that we could well be in for further bouts of currency market volatility.
All in all though the US dollar has had a disappointing week, down across the board with the exception of the New Zealand dollar, where we saw an unexpected rate cut.
Commodities
We’ve had a positive week for oil prices this week after last week’s OPEC meeting, but rising production levels are serving to constrain the upside somewhat, while this week’s US dollar weakness has helped underpin the downside. It appears for now that oil price have settled into a new price range whose upper boundary is in the mid to high $60 area, in the absence of any pledge from the Saudi’s to limit production capacity.
Gold has had a fairly positive week despite speculation about the timing of a Fed rate rise on the back of better than expected US economic data earlier this week.
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