Markets on tenterhooks as Greek deadline looms

30 Jun 2015 | Author: | No comments yet »

Asian markets creep up as the euro sags in deepening Greek crisis.

U.S. stock markets pointed to a positive open on Tuesday, rebounding after Monday’s sharp selloff prompted by increased fears that Greece will leave the eurozone.Wellington: Asian stocks rose with US index futures in the wake of a $1.5 trillion global rout Monday, while the euro pared a quarterly advance as investors watch developments in Greece.U.S. stocks rebounded from the biggest slide in a year, while European equities fell with the euro amid 11th-hour wrangling before bailout funding for Greece ends.

Asian shares edged up and the euro sagged in early Asian trading on Tuesday as Greece lurched towards defaulting on a looming debt payment, raising the likelihood of the cash-strapped nation’s exit from the eurozone. “All in all, many in the market had already factored in the likelihood of Greece defaulting, but there is no guarantee the stability will last,” said Kyosuke Suzuki, director of forex at Société Générale in Tokyo. Futures for the Dow Jones Industrial Average rose 52 points, or 0.3%, to 17,572 on Tuesday, while those for the S&P 500 index picked up 6 points, or 0.3%, to 2,056.25.

Greece will not pay a €1.6bn (US$1.8bn) loan instalment due to the International Monetary Fund on Tuesday, a Greek government official said, after talks between Athens and its creditors broke down at the weekend when the prime minister, Alexis Tsipras, called a surprise referendum on the austerity plan. Asian investors were also nervously awaiting the reopening of China’s markets after stocks plunged further on Monday, taking losses to more than 20% since their mid-June highs.

The index had climbed as much as 3 percent during the period, boosted by health-care companies amid merger activity, and as banks rallied with rising bond yields. The benchmark equity measure last week came within a point of its all-time high before slipping amid concerns that Greece wouldn’t reach a deal with its creditors before its bailout expires today. Later in the U.S., attention turns to a trio of economic releases, including the Case-Shiller home price index, the Chicago purchasing managers’ index and consumer confidence.

Ratings agency Standard and Poor’s cut Greece’s sovereign debt rating one notch further into junk levels to CCC-, saying there was a 50% probability it would leave the eurozone. US stock futures were up about 0.2% in Asia, suggesting that a semblance of stability could return to markets after steep losses in the previous session.

Stocks have only crossed the level once since 2012 — the period of last October’s selloff, which gave way to an 11 percent advance at the end of 2014. About $1.5 trillion was erased from the value of global equities Monday after Greece short-circuited bailout talks by calling a referendum on creditor demands. The Greek government asked for a two-year bailout program from the European Stability Mechanism, though the proposal didn’t include any of the economic-reform measures negotiators had sought for months. The euro fell to a one-month low of $1.0955 on the EBS trading platform on Monday and then reversed direction in North American trade as investors exited their euro-short positions, pushing the common currency as high as $1.1279. A report today showed home prices rose at a slower pace than projected in April, indicating the market was experiencing uneven gains as it entered the busier selling season.

Until volatility spiked due to developments in the Greek crisis, investors had used the euro to fund carry trades, a strategy of borrowing in a low-yielding currency to buy higher-yielding assets. Investors should look at stock market risks from a long-term and rational point- of-view, according to a statement from a sub-committee of China’s Asset Management Association. The government is considering pushing China Nuclear Engineering’s IPO to a later date because of current market conditions, according to people familiar with the situation, who asked not to be identified as the matter is private.

Treasuries are headed for a third monthly slide as a rebound in the world’s biggest economy buoys prospects for the Federal Reserve to increase borrowing costs as soon as September. Employers added 280,000 jobs in May, the most in five months, and hourly earnings climbed from a year ago by the most since August 2013, a Labor Department report showed on June 5. While European Central Bank Executive Board member Benoit Coeure said in an interview with Les Echos published late Monday that a “yes” decision will prompt euro zone members to “find the means, under one form or another, to honor their commitments.” The euro lost 0.4% against the dollar and fell 0.6% to ¥136.94 on Tuesday. Willis Group Holdings Plc rose 4.6 percent after the third-largest insurance broker agreed to merge with Towers Watson & Co. to add consulting operations and help take on larger U.S. rivals. European assets were whipsawed Tuesday by comments from government officials all over the euro zone, as Greece hurtles toward an uncertain financial future.

Dutch Finance Minister Jeroen Dijsselbloem, who heads the group of euro-region counterparts that had been in negotiations with Greece, said the ESM proposal will be considered later on Tuesday. Germany’s DAX Index has plunged 8.5 percent in the quarter, the biggest decline since 2011 and among the worst performances in 24 developed markets.

Euro-area sovereign securities handed investors a 5.7 percent loss this quarter through June 29, according to Bank of America Merrill Lynch’s Euro Government Index, the worst quarterly performance in data going back to 1985. Even after falling from a seven-year high on June 12 into a bear market yesterday, the Shanghai Composite Index index is 14 percent higher for the quarter, a fifth straight gain.

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