Markets "on standby" ahead of the Greek referendum

Friday, July 03, 2015

As the Greek bailout negotiations have been “on hold” until the country’s referendum on Sunday, attention turned to US employment data yesterday. We received mixed US employment indicators yesterday, which somewhat distorted the outlook for a possible US interest rate rise later this year. US unemployment dropped to 5.3% in June beating analysts’ expectations of 5.4%. However, total nonfarm payrolls added 223K in June, missing estimates of 233K. The USD index reversed earlier gains and slid lower yesterday towards 96.0, while this morning the index remained under pressure and hovered below 96.0 against a basket of currencies.

Nikkei’s Services PMI rose to 51.8 in June compared to 51.5 in May, while Composite PMI dropped slightly to 51.5 in June from 51.6 in May. The Nikkei index edged slightly higher overnight and hovered around 20,540. In China, HSBC’s Services PMI declined to 51.8 in June from 53.5 in May while HSBC’s Composite PMI fell to 50.6 in June compared to 51.2 in May. Following the poor Services PMI data, the Hang Seng index dropped over 160 points (-0.65%) towards 26,100.

US markets are closed for Independence Day today, so we expect thin trading volumes across global equity and commodity markets. Market participants might be cautious, awaiting the results of the Greek referendum on Sunday which could provide an insight into the Eurozone’s economic stability and future. European equity markets were mixed in early trade this morning, hovering within the recent range. The euro extended gains above 1.11 against the USD this morning, while sterling traded around 1.4050 against the euro in early trade. Today, the main focus will be on the release of Markit Services PMI data from the UK and the Eurozone as well as the Eurozone’s retail sales.  

There is increasing uncertainty and confusion regarding Sunday’s Greek referendum. Finance Minister Yanis Varoufakis reported that he would resigns if there is a “yes” vote in Sunday’s ballot. In addition, there is further confusion within the coalition government. Greek banks have been closed this week, causing increasing economic damage to the country’s operations. There are increasing rumours that banks and the Athens Stock Exchange are not expected to open until an agreement with international creditors is reached due to liquidity problems.

EURUSD    

EURUSD Curncy (EUR-USD X-RATE)   2015-07-03 09-03-51

USD index  

DXY Curncy (DOLLAR INDEX SPOT)   2015-07-03 09-04-53

Events for today:

3

US Market Holiday

0245

JP

Jun

Markit /JMMA Composite PMI

0245

CN

Jun

HSBC Services PMI

0855

DE

Jun

Markit Services PMI

0900

EZ

Jun

Markit Services PMI

0930

UK

Jun

Markit/ CIPS Services PMI

1000

EZ

May

Retail Sales

 

All times UK Local Time

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