The week kicks off with traders continuing to focus on the Greek rescue talks. The IMF walkout a week ago, another failure at finance minister-level talks late last week and the continuing run on Greek banks leaves Monday’s president and prime mininisterial-level talks as the last chance to stave off default before the end of the month.
Key to the deal, or the likelihood of one, is that geopolitics might see the national leaders take the decision out of the hands of the finance ministers because, as Larry Summers wrote in the FT Greece is likely to become a “failed state.”
With Greek PM Tsipras playing hardball and turmoil on NATO’s borders, this really has become the creditors’ and the larger NATO alliance’s problem. Greek finance minister Varoufakis said last week the parties aren’t that far apart. We’ll know if a deal is struck Monday evening our time.
Interestingly, for all the column inches written about Greece and the fear of default, forex traders aren’t overly worried. The Euro ended Friday at 1.1355, up 1.25 cents on the week and 3.35% on the month, even though Greece has been smouldering.
That suggests traders in the world’s biggest market, and of one of the worlds most traded assets – the Euro – believe a compromise will be reached. Either way, expect the Aussie dollar to move sharply once a decision – deal or no deal – is announced.
Locally it is a very quiet week with the ABS quarterly residential price index, out Tuesday at 11.30am, the only real highlight.
Other than that, it is a week full of offshore catalysts for local traders.
Shanghai stocks have been marching to the beat of their own drum for months now, but the big 6.36% fall on Friday, if it continues, could weigh on global sentiment. Likewise if no deal is done over Greece – or at least no deal to extend the deal – overall market sentiment could suffer. That will put the ASX and global markets under pressure. It’s a fluid week though because the flip side is a a deal could be a boon for stocks.
It’s likely fluid in bond land too. Greece and the stock market weakness at week’s end saw bonds rally a little with the US 10-year finishing the week at 2.26%, down 15 points. German Bunds were down 9 points as they saw safe haven-style buying. Locally the 10s closed at 2.89%, down 11 on last week’s open and 15 on the high.
Datawise globally it’s a quiet week except for US durable goods, the latest read of Q1 US GDP the ‘flash’ manufacturing PMI data.
The Chicago Fed activity index on Monday is likely to be lost in the Greek noise.
Tuesday is Markit and HSBC flash manufacturing PMI day in China and around the globe. Existing home sales and durable goods in the US will be interesting Tuesday, as will new home sales.
China’s leading index of economic activity will likely attract a lot of attention Wednesday, as will the IFO in Germany and the latest round of Q1 GDP data in the US. The last read saw growth downgraded to -0.7%, but the market is looking for an improvement to -0.2% annualised.
Thursday sees the release of personal consumption and spending data along with initial jobless claims.
Kiwi trade is out Friday along with Japanese CPI.
Here’s Westpac’s excellent snapshot of all the key data and events.