Wall St. trims gains as Greece debt default looms

30 Jun 2015 | Author: | No comments yet »

TSX, Dow bounce upwards despite Greek crisis.

The Toronto stock market pushed ahead with gains in late morning trading as Greece inched towards the default deadline on its loan to the International Monetary Fund.A day after the Dow plunged 350 points in the worst selloff of the year, Wall Street wavered on Tuesday as the crisis in Greece continued to develop ahead of a 6 p.m. The S&P/TSX composite index moved higher towards midday, rising 66.17 points to 14,556.32, while the loonie traded at 80.13 cents US, down 0.57 of a U.S. cent. Still, fears about a default “are being soothed somewhat by reports that a last-second deal may still be achieved,” said an investor note from Charles Schwab.

Traders appeared mostly unfazed by the looming midnight cutoff in Greece, which suggests that at this point few expect an outcome any more negative than is already being anticipated. The Dow Jones Industrial average rose 58.56 points to 17,654.91, while the Nasdaq moved up 24.39 points to 4,982.85 and the S&P 500 picked up 7.72 points to 2,065.36. The mixed results followed deep declines on Monday, with the TSX down 2 per cent and the Dow dropping 1.9 per cent as Greece limited bank withdrawals and announced a referendum on the EU’s austerity package. Oil prices made some advancement, with the August contract lifting 47 cents to US$58.80 a barrel while the August gold contract fell $10.70 to US$1,168.30 an ounce. Statistics Canada reported the latest real GDP figures, showing that Canada’s economy was pulled down 0.1 per cent in April, affected by weakness in the mining and energy sectors.

For U.S. equity markets, Tuesday was the “calm after the storm,” according to David Lafferty, chief market strategist at Natixis Global Asset Management. “We’re still in a little bit of a waiting game for the [Greek] referendum scheduled for Sunday,” he said. “The market has come down from yesterday’s heightened volatility. Tuesday’s bounce appeared to be fueled by news that Greece and its lenders may find a last-minute measure to avert a default, after Greece proposed a two-year deal using the eurozone bailout fund, according to The Wall Street Journal. Riding the final hours of Greece’s midnight deadline, 19 finance ministers of the eurozone plan to meet Tuesday evening to assess the latest proposals from Athens that would keep the bailout talks moving forward.

While the VIX is still elevated, it’s leveled off, so there’s not the spike in fear we saw yesterday.” On Wall Street, traders digested a slew of economic data from the U.S. including the latest read on the housing market with the April S&P/Case-Shiller home price index 9 a.m. Market reaction to domestic economic reports was muted. “This is a holiday-shortened week and with Greece news driving the markets, we expect some erratic trading. In Europe, markets recovered in earlier trading amid news that the Greek government has made a last-minute effort to break the deadlock with its creditors. “The most likely scenario in the event of a Greek default and the country’s departure from the eurozone is not a global economic crisis. Greece’s economy contributes less than two per cent of European GDP and it is so tiny that its output is equal to that of Pakistan,” said BMO analyst Jack Ablin. Private lenders have been avoiding Greek debt for years, so most of the money it owes – a substantial 250 billion euros ($347 billion Cdn) – is to international lenders such as the IMF and the European Central Bank. “Greece is a tiny economy and eventually the markets will be able to look through the uncertainty and realize that this is most likely an isolated case,” he wrote in a note to investors.

From the same period a year prior, prices saw a 4.9% increase –lower than the 5.5% expected gain. “Home prices continue to rise across the country, but the pace is not accelerating,” David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, said in the report. “Moreover, consumer expectations are consistent with the current pace of price increases. A recent national survey published by the New York Fed showed the average expected price increase among both owners and renters is 4.1%.” Traders also got a snapshot of the Midwest manufacturing sector. Questions remain about the future of the country as it heads toward a referendum Sunday that is being framed as a vote on whether Greece should stay in the eurozone. CAG, +1.53% shares rose 0.9% after the company reported fiscal fourth-quarter earnings and said it’s planning to exit the private-label business as it focuses more on growing its consumer and commercial foods segments. For the most part, the markets appeared to shrug off concerns about Greece’s future in the eruo – worries that were the primary downward catalyst for Wall Street in the prior session.

Meanwhile, the Greek prime minister’s office said the government there was seeking a two-year agreement with the eurozone to cover the nation’s financing needs in a bailout package. Other markets: Chinese shares bounced back from heavy selling seen Monday, pulling the benchmark back from losses that had put it in bear-market territory.

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