Greek referendum ends with a strong "NO" vote

Monday, July 06, 2015

The Greek referendum showed a convincing “no” vote with around 61% of Greek voters against the creditors’ proposal and 38% in favour. Greek Prime Minister Alexis Tsipras insisted that he will now have a stronger mandate to negotiate with European creditors for a better deal for the Greek economy with less austerity measures and a possible restructuring of Greek debt. There will be emergency meeting during Monday and a scheduled Eurozone summit on Tuesday. The euro initially came under pressure and declined towards 1.09 but has strongly rebounded trading around 1.1080 against the USD. European equity markets posted renewed losses in early trade this morning, with the DAX, CAC and IBEX indices retreating between 1.2% and 1.6%.

The Greek banking system is close to breaking point due to increasing liquidity problems as Greek banks run out of cash. The ECB will discuss support today. The possible failure to maintain ELA would mean increasing damage to the Greek banking sector. Then, a Grexit might be highly likely in the coming weeks. The next looming deadline is on 20th July when Greece needs to pay 3.5 bln euro to the European Central Bank. Thus, if Greece misses the July 20 payment, the ECB is widely expected to cut them off entirely.    

Resignations so far:

1) Greek Finance Minister Yanis Varoufakis resigned reporting “soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today”.

2) Ex-Prime Minister and President of Opposition Conservative Party New Democracy Antonis Samaras resigned overnight. Samaras had already faced calls to resign in January after his party was beaten in national elections by the radical leftist Syriza party of Prime Minister Alexis Tsipras.

EURUSD

EURUSD Curncy (EUR-USD X-RATE)   2015-07-06 09-20-28

Global markets might be fairly volatile following Sunday's decision of the Greek referendum, but the President of Argentina Cristina Femandez, which suffered a similar crisis more than a decade ago, welcomed the referendum result. She tweeted that Greece’s vote marked “a resounding victory for democracy and dignity”. There are bare similarities between Argentina's 2002 financial meltdown and the turmoil in Greece: severe monetary regimes, creditors fighting domestic politics to fix the problem and banking systems at breaking point.

Japan’s leading index fell to 106.2 in May compared to 106.4 in April. In the Eurozone, Germany’s factory orders declined 0.2% m/m in May from a 1.4% rise in April, beating analysts’ expectations of a -0.4% drop. Spain’s industrial output NSA rose 1.7% y/y in May compared to a previous increase of 2.7%. Today, investors’ attention will turn to the release of the US Markit Composite and Services PMI data as well as ISM Non-manufacturing activity in June. The USD index continues its strong upside rally, climbing above 96.00 against a basket of currencies.

USD index

DXY Curncy (DOLLAR INDEX SPOT)   2015-07-06 09-20-11

The strong USD and renewed concerns regarding Greece’s economic stability weighed on most commodity prices this morning. WTI front month futures retreated sharply over 3% to retest $55 per barrel while Brent front month futures slid lower and breached $60 per barrel area. Furthermore, crude oil fundamentals remain bearish following an increase of crude oil stocks last week. Gasoline and heat oil followed the downtrend and declined over 2% this morning.

Base metal prices have been trading in negative territory in early trade today as worries regarding the Greek debt crisis dominated the market. Copper posted heavy losses towards $5600, while lead fell over 1.7% to retest $1730 and nickel dropped towards $11600. Precious metals also remained under pressure with gold hovering around $1160 and silver falling towards $15.50. Platinum and palladium extended declined over 1.2% this morning.   

WTI front month futures

CLQ5 Comdty (WTI CRUDE FUTURE  A 2015-07-06 09-19-38

 

Events for today:

0600

JP

May

Leading Index

0700

DE

May

Factory Orders

0900

UK

Jun

New Car Registrations

1445

US

Jun

Markit Composite PMI

1500

US

Jun

ISM Non-Manufacturing

 

All times UK Local Time

 

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