Europe
Stocks in Europe fell on Wednesday when Greece’s latest proposal in a cash-for-reforms deal was rejected by creditors. Greek government officials purportedly also rejected a counter-proposal from creditors, putting the two sides in deadlock again as Greek PM Tsipras flew out to Brussels to meet the heads of Germany, France, the ECB and the IMF.
Pensions remain a key sticking point, especially for Germany whose voters are understandably disgruntled at funding earlier retirements in Greece. The Greek proposal also heavily relies on raising taxes not cutting spending for producing a budget surplus, but tax collection has not historically been Greece’s forte.
On a more positive front there was no request for an ELA extension on Wednesday since depositors reportedly sent funds back into Greece on Tuesday in anticipation a deal would be reached. Given today’s rejection, it may be a different story tomorrow.
Worse than expected economic data added to negative sentiment with German business confidence worse than expected according to the IFO.
Having underperformed the rest of Europe earlier in the week, the less Greece-affected FTSE 100 edged out gains as broker notes lifted retailers.
Sainsbury’s and Next received broker upgrades helping their shares and those of sector rivals Morrisons and Tesco (LONDON:TSCO) rise, helped by news of a mega-merger between European supermarkets Ahold and Delhaize.
Royal Dutch Shell (LONDON:RDSa) was a top riser on the FTSE as the company moved closer to finalising its takeover of BG Group (LONDON:BG) helped by a broker upgrade. There was minimal concern in markets over an appeal against the company’s plans to drill in the artic by environmentalists.
House builders were a drag on the benchmark index after hawkish comments from the BOE’s Weale and house loans fell below expectations, though still increased over the previous month.
US
US stocks opened lower on Wednesday following a higher revision to first quarter GDP and the rejection of Greece’s latest reform proposals by its creditors.
Q1 GDP declined by -0.2% in the first quarter in line with the latest expectations which is less than the previously forecasted -0.7% thanks to an uptick in housing and revised trade figures.
Netflix (NASDAQ:NFLX) shares opened higher on Wednesday after the video-streaming company reported a 7-for-1 stock split. It will start trading at the new price beginning July 15. The split should theoretically make the stock more widely affordable, and if the recent experience of Apple (NASDAQ:AAPL) is anything to go by, could help spur further gains.
Monsanto shares opened lower after the company reported better than expected profits but missed on revenues.
Boeing (NYSE:BA) shares slipped 0.5% on news it will replacing outgoing boss Jim McNerney with Dennis Muilenburg, leaving McNerney in the singular chairman role.
FX
The US dollar was mixed on Wednesday after first quarter GDP came in line with expectations and progress towards a deal in Greece stalled.
The British pound saw some early strength after MPC member Martin Weale said in an interview that the Bank of England should be ready to raise borrowing costs as early as August. Selling came into GBP/USD at 1.58 and the pair gave up the gains by mid-morning trade in New York.
Commodity currencies were hardest hit with lower oil and gold prices sending the Canadian dollar, Norwegian krone and Australian dollar all lower versus the greenback.
Commodities
Crude oil erased early losses in after the latest EIA inventories report showed a reduction of -4.9M barrels, a bigger decline than the -1.8M expected. It’s one of the larger drawdowns seen in recent months and goes someway to offset the increased supplies threatened from OPEC producers.
Gold dipped as low as $1170 per oz after US first quarter GDP declined less than the previous estimate had suggested, giving the Fed greater scope for a rate hike this year.
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