European equity markets continue to remain under pressure. The CAC, DAX and London equity benchmark indices extended losses in today’s trading session and retreated between 0.10% and 0.9%. The Athens Stock Exchange extended sharp declines for third consecutive sessions as negotiations between the Greek government and its creditors have become very strained. Greece’s liquidity has been draining slowly while the country is due to make a EUR 300 mln repayment to the IMF on Friday 5th June, followed by a further EUR 1.2 bln of IMF payments coming due over the next fortnight.
However, the euro rallied strongly above 1.11 against the USD today, reaching near a 10-day high amid hopes of a possible Greek deal around the corner, despite that Euro group’s President Dijsselbloem reported that such an agreement was still far away.
In addition, we received fairly disappointing US economic data which added renewed pressure to the US dollar. Factory orders dropped 0.4% in April versus analysts’ expectations of a 0.1% decline, while the IBD/TIPP economic optimism fell to 48.1 in June compared to 49.7 in May, missing estimates. Furthermore, the ISM NY manufacturing fell to 54.0 in May from 58.1 in April. The USD index dropped significantly to 96.0 against a basket of currencies, offering strong support to most commodity prices.
Crude oil prices rebounded strongly with Brent front month futures climbing above $65 per barrel and WTI front month futures surging above $60 per barrel ahead of the crucial OPEC meeting on Friday.