US stocks are set to follow European markets towards a lower open on Monday after Greece voted an overwhelming ‘No’ to the latest proposals for economic reforms from the country’s creditors. The vote increases the chance of a Greek exit from the Eurozone.
Stocks are off their lows since the announced departure of Greece’s finance chief Yanis Varoufakis, which could mean more amiable negotiations. Really, all the players in negotiations remain the same bar one and the ‘red line’ issues that have prevented a deal all along remain the same. The post-negotiation dinners enjoyed by Europe’s leaders in Brussels maybe a little less awkward without Varoufakis but a deal is no more likely.
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.
The latest bout of global instability from Greece to China has put US stocks in the negative again for 2015.
Nerves are rattled ahead of second quarter earnings season which could see a repeat or even acceleration of the year-over-year losses seen in the first quarter amongst S&P 500 firms. Energy and multinational firms exposed to a weak Oil price strong Dollar are again expected to be the biggest risk-areas.
Earnings season kicks off in traditional fashion with Alcoa (NYSE:AA) reporting this week, with earnings also expected from PepsiCo (NYSE:PEP) and Walgreens Boots Alliance Inc (NYSE:WBA).
On Monday, the major economic data event is Markit’s services PMI for June, expected to increase to 54.9 from 54.8.
Futures suggest the:
S&P 500 will open 14 points lower at 2,062 with the
Dow Jones expected to open 130 points lower at 17,600 and the
Nasdaq 100 35 points lower at 4,398.
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