Stocks rise on speculation of a late Greek deal

30 Jun 2015 | Author: | No comments yet »

Asia stocks bounce back but Greece uncertainty still looms.

NEW YORK (AP) — U.S. stocks moved higher in early trading on speculation that the Greek government is considering a last-minute attempt to break the deadlock between the country and its creditors. TOKYO (AP) — Asian stock markets bounced back Tuesday, recouping some of the previous day’s sharp losses, but investors remained worried the crisis in Greece could spread to other financially weak countries.NEW YORK — The Standard & Poor’s 500 index retreated the most since April 2014, wiping out its gain for the year, as global equities sold off on Monday amid concern over fallout from the Greek financial crisis.

China’s Shanghai Composite was down 0.6 percent at 4,052.47 while Australia’s S&P/ASX 200 was little changed at 5,423.70. “Most traders are well prepped over the possible fallout of Greece. It’s guessing which card will fall next that’s the difficult bit,” said Nicholas Teo, analyst at CMC Markets in Singapore. “The Brazilian real was knocked back hard these past days as have the Turkish lira and most other emerging Asian currencies. These associations are made to Greece as they fall under the labeling of global emerging markets.” A series of events over the weekend has left Greece perilously close to defaulting on its debts.

On Tuesday, there was some optimism that a deal could still be done after Jean-Claude Juncker, the head of the European Union’s Executive Commission, made a last-ditch effort to help Greece get a bailout deal. Greek leaders pulled out of talks with creditors that include European nations and the International Monetary Fund and called a referendum that’s likely to determine if Greece stays in the euro common currency. The Chicago Board Options Exchange Volatility index surged 34 percent, its biggest increase since April 2013. “We finally reached the breaking point,” said Michael James, a managing director of equity trading at Wedbush Securities in Los Angeles. “With so much uncertainty around a potentially negative outcome, the knee-jerk reaction will be to reduce risk assets. In the vote set for Sunday, the government is urging Greeks to vote against its creditors’ proposals, arguing that they are humiliating and that they would prolong the country’s financial woes. You have a potentially very ugly situation this week.” Greece closed its banks and imposed capital controls, a measure that will deepen the country’s recession and risk driving it toward an exit from the euro.

Talks over bailout aid with international creditors collapsed late Friday, as Prime Minister Alexis Tsipras unexpectedly called a July 5 referendum on the austerity demanded by creditors. The Dow Jones industrial average lost 350.33 points, or 2 percent, to 17,596.35, and the Nasdaq composite fell 122.04 points, or 2.4 percent, to 4,958.47. U.S. stocks extended losses in afternoon trading as S&P cut its rating on Greece, with a negative outlook, and said the probability of the country exiting the eurozone is about 50 percent. “There was an expectation that something would break positively at the last minute, but it appears it’s going to be a little messier than that,” Kevin Caron, a market strategist and portfolio manager who helps oversee $170 billion at Stifel Nicolaus in Florham Park, New Jersey. “As things get worse with the Greek economy — social unrest, nervousness and the possibility of an EU exit — there’s the potential for even more weakness.”Global stocks plunged, with the MSCI all-country world index falling 2 percent for its steepest slide since June 2013. Gauges of stock volatility surged around the world as the weekend meltdown in Greece collided with China’s market unraveling and traders bought hedges to stanch the bleeding. Investors bought German and British government bonds, which are seen as safe havens, and sold bonds issued by Greece’s government, sending those yields sharply higher.

The S&P 500 hasn’t had a weekly move of more than 1 percent since April, and the last time it had a single-day move of more than 2 percent was Dec. 18. What if people panic?'” said Karyn Cavanaugh, senior market strategist at Voya Investment Management. “What’s going on in Europe, of course it’s going to roil markets in the short term,” But for U.S. investors, she said, “the long-term impact is not that big of a deal.” If Greece defaults and switches to a new currency, it’s sure to shake global financial markets. The ECB has already committed to buying 60 billion euros a month in corporate and government bonds to push down interest rates and help the European economy.

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