What a week ahead for traders and market watchers. Greece is on the precipice of default after the weekend’s events, China has cut rates after the big fall in stocks last week and we still have a raft of important data to get through both in Australia and offshore.
Monday 5 am Sydney has past and foreign exchange traders have voted. Traders have initially sold the Euro down below 1.10 for a fall of more than 1%. Forex traders have also run to the safe haven of the Yen which has rallied more than 1%. It’s a notoriously volatile period but its the first inclination traders all over the world, and in other markets, have of how fractious trade might become this week after any chances of a Greek deal seemed to collapse over the weekend.
It’s been a short trip from news early last week that a deal could be done by Thursday to the current situation where it now seems default is almost a certainty on Tuesday.
Over the weekend Greek prime minister unilaterally announced a referendum to be held on July 5th for the Greek people to vote on whether or not to accept the deal on the table from Greece’s creditors. It’s really a vote on Greece remaining in the EU says former Prime Minister Antonis Samaras. That’s no doubt true and current prime minister Tsipras has urged his countrymen to vote no.
Whatever happens, the next week is unlikely to be an easy one for Euro traders, stock indexes on the continent and the EU’s political leadership. Sony Kapoor is right.
That is not to mention Shanghai which has collapsed from an all-time closing high of 5,166 to Friday’s close of 4,192. That’s a loss of 974 points, 18.85% and the acceleration of the collapse in the last two trading days of last week has scared policy makers so much that the PBOC cut rates again on Saturday. The PBOC said it was dropping the 1-year benchmark lending rate by 25 basis points to 4.85 percent, and reducing the 1-year deposit rate by 25 basis points to 2 percent.
At the same time it dropped interest rates it has also lowered the reserve requirements for some rural banks while at the same time giving a massive 300-point drop to finance companies.
The aim, according to the PBOC is to, “help stabilise growth, adjust structures and lower social financing costs.”
The big question for Chinese traders is whether it can stabilise Shanghai stocks.
Locally given it’s the end of the financial year Tuesday, the big – REALLY Big – question is whether investors and portfolio managers will be selling in the early part of the week after Friday’s sudden sell-off of 1.5% on the ASX200.
Politically, things should be a little quieter but Joe Hockey gets his verdict on Tuesday in the defamation action he took against Fairfax Media. And Q&A will be watched closely on Monday night after last week’s Zaky Mallah fiasco.
Now, to the data both here and around the world.
The NAB’s economics team said locally, “there’s a big slug of the early month partials due, all coming in the lead up to the July RBA Board meeting the following Tuesday.”
Highlights in Australia are RBA governor Stevens speaks in London on Tuesday on “The Changing Landscape of Central Banking”. HIA home sales and Private sector credit are also out Tuesday. Building approvals and AiG PMI are released on Wednesday, with international trade, house prices and NAB Online Retail Thursday. The big one for the week though is retail trade on Friday.
On this the NAB said:
Top down factors point to a good May retail sales result. There was a generally positive reaction to the Federal Budget and there’s been further improvement in the labour market, factors underpinning spending propensity and household income growth. We look for faster than expected growth of 0.6% in May, also benefiting from some payback after the flat result for April, and ahead of the market consensus’ 0.5% pick.
Offshore German CPI is the big one Monday, if you don’t count Greece sourced and Chinese market machinations. Tuesday sees the release of Japanese construction and housing starts and German unemployment rate. UK GDP, EU CPI and Case Shiller house prices and Chicago PMI are out in the US.
The big day for the week, and the first day of July, is Wednesday and we see the release of the series of HSBC/Markit manufacturing PMI’s from Korea, China, Japan, Europe and the America’s. In the US the ISM PMI is also out while the ADP employment survey is out before non-farms payrolls a day early on Thursday before the 4th of July holiday on Friday in the US.
It’s going to be a huge week.
Here’s Westpac’s excellent calender of all the key data and events.