Europe
Several lifelines opened up for Greece on Thursday sending European markets higher. Greece’s crises appears to be nearing an end, for now.
The Greek parliament approved the bailout deal signed by Prime Minister Tsipras and Eurozone creditors. At the same time, an arrangement was reached amongst European countries to provide a bridge loan which would allow Greece to meet its July 20 payment to the European Central Bank. The ECB determined these conditions sufficient for raising the cap on emergency lending to Greek banks by €900m.
The ECB’s willingness to raise the ceiling on the ELA puts to bed the immediate risk of a banking collapse and paves the path towards the reopening of Greek banks and the eventual end to capital controls.
Mr Draghi saying that the need for debt relief in Greece is “uncontroversial” puts the ECB’s stance on the issue alongside the IMF. It increases the odds of a more substantial haircut than has been admitted by Eurozone finance ministers.
It was this decision to lift the ELA that sparked the strongest market reaction with stocks heading higher and euro recovering. The ECB’s expected decision to leave Eurozone benchmark interest rates unchanged in July as well as its macro assessment of the Eurozone economy left markets cold.
ECB President Draghi’s message in his press conference statement was consistent with the previous month; inflation has bottomed and should pick up further this year and next, so long as there is a full implementation of the ECB’s asset purchase program.
There was a small degree of front loading to QE in May and June and will be in July, as first indicated by ECB member Coeure. The ECB president indicated there will be an offsetting lesser amount of purchases in August.
The FTSE 100 rose on Thursday, lifted by a well-received rise in profits at Dixons Carphone (LONDON:DC) while miners were higher despite Rio Tinto (LONDON:RIO) reducing its iron ore production target for the year as China’s stock market showed signs of stabilising.
BT Group (LONDON:BT) shares managed to brush off the prospect of a break-up as suggested by regulator Ofcom, with shares of broadcasting rival SKY PLC (LONDON:SKYB) rising over 1%. A break up would be a huge undertaking and would likely take years to agree on how each region would operate and actually implement the changes.
US
US stocks opened higher on the prospects of a deal for Greece on Thursday, boosted by large gains from Netflix (NASDAQ:NFLX) and Intel (NASDAQ:INTC) after the companies impressed with second quarter earnings reports.
Netflix opened a massive 12% higher, adding to the 100% gains that had already been achieved since the start of 2015. The online streaming company reported much better than expected subscriber growth alongside higher profits in the second quarter. International subscribers are driving the growth but the number of US subscribers was also higher than expected, in part thanks to Netflix original content.
Shares of eBay Inc (NASDAQ:EBAY) jumped after the company announced it was selling one of its business units and that revenues rose 7%. Net income slumped in part thanks to restricting costs as the ecommerce company prepares to spin off PayPal this week.
Citigroup (NYSE:C) announced its highest profit in eight years thanks to a drop in legal expenses.
FX
Dollar strength continued throughout Thursday as Janet Yellen began her second day of testimony, though the greenback pulled off its highs when the Philadelphia Fed manufacturing index fell well short of expectations.
The saving of Greece wasn’t much consolation for the euro on Thursday as the ECB president Draghi confirmed the full implementation of QE in the Eurozone until September next year. The euro’s weakness was most apparent against the British pound as EUR/GBP dropped to a fresh seven-year low.
Commodities
Ongoing dollar strength is taking its toll on the precious metals space. Gold and silver both lower on Thursday and are gradually grinding down towards new multi-year lows.
Crude oil was mixed after deep declines on Wednesday.
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