Global traders are doing the Greek countdown. When I went to Google and searched the words “Greek referendum” there were 3,740,000 results. While I doubt all those stories are related to yesterday’s July 5, 2015 referendum, just the fact that are are so many references is astonishing for a country that only has 11 million people. While MrTopStep still thinks the best thing for the European lenders is to allow a default, Europe has shown little back bone when it comes to dealing with this situation and, now its time to start thinking about Greece leaving the Eurozone, and the ramifications to its European partners.
It’s Sunday night at 7:00 pm CT and the S&P 500 futures (ESU15:CME) are down sharply in Globex. The low in the overnight session so far is 2034.25 and last the futures are trading 2041.74, down -27.00 points. The Euro sold off sharply in Asia as traders gear up around the world for the final counting of Greece’s referendum outcome and a big pick up in volatility. The final results show that over 61% of Greeks voted no to creditors austerity demands.
GREEK PLAN “D” IN EFFECT
When the Greek government ordered its banks closed for 6 days, it was sending a message that things were starting to actually break down, and yesterday’s vote was the other part of the breakdown. MrTopStep has said throughout the crisis that the Greeks would default, and barring some last minute miracle, it’s already underway. Plan “D” will not only have far reaching effects for the Greek population and its European creditors but the turbulence could help push back the Fed’s timetable for raising rates in the second half of 2015 as global growth slows. Global chief investment officer for UBS Wealth Management Mark Haefele recently wrote that “We believe the Federal Reserve can be relied upon to respond to any global increase in risk aversion. The Fed is likely to be willing to postpone its first rate increase beyond September or even into 2016 if Greek worries prompt a sharp appreciation of the dollar.”
Overnight the Euro and the S&P rallied, and crude oil traded all the way down to $54.00 area. The S&P futures traded all the way back up to the 2060 level. This morning is going to be a Greek algo headline mess. Keep those chin straps handy, you’re going to need them this morning.
In Asia 9 out of 11 markets closed lower, and in Europe 10 out of 12 markets are trading lower this morning. This weeks economic calendar includes only 14 economic releases, 7 T-bill or T-bond Auctions or Announcments, the June FOMC Minutes, 4 Federal Reserve Bank Presidents speak, Janet Yellen speaks and Alcoa kicks off the earnings season on Wednesday. Today’s economic calendar includes Gallup US Consumer Spending Measure, PMI Services Index, ISM Non-Mfg Index.
GERMANS CALL FOR GREEK OUSTER
Our View: The Greeks voted, and so has the S&P. If indeed the Greeks actually default, there will be further financial pain felt in Europe. Asia was already weak so the Greek news will be added to the China “bubble” theory. I can’t rule out a larger selloff but there are a lot of lows made on Sunday nights on Globex. The PPT can’t rescue Europe but that doesn’t mean they won’t be around in our markets. I do not think the Greek situation is over but at least the world gets the truth about a country that borrowed money when they needed it and stiffed the creditors when they said ‘No’ to new bailout terms. Our view is that this has been a long time coming, and while we are very concerned about the two big downside gaps, we also think the “news is out.” Not sure if it’s today or later this week but we think the ES starts going back up again.
- In Asia 9 of 11 markets closed lower: Shanghai Comp. 2.41%, Hang Seng -3.18%, Nikkei -2.08%
- In Europe 10 out of 12 markets are trading higher: DAX -1.22%, FTSE -0.5%, MICEX -0.77%, GD.AT –% at 7:00 am CT
- Fair Value: S&P -8.35, Dow -94.74, Nasdaq -9.61
- Total Volume: 1.2mill ESU and 6.5k SPU traded
- Economic calendar: Gallup US Consumer Spending Measure, PMI Services Index, ISM Non-Mfg Index.
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