– Events are spinning out of control in Greece. Ambrose Evans-Pritchard in the UK Telegraph has pried open the box and said Greek prime minister Tsipras didn’t expect to win the referendum. On that basis it’s no real surprise the new Greek finance minister Euclid Tsakalotos turned up to the EU meeting last night with no fresh proposals. They are apparently coming back in a day but that does not augur well for a deal getting done anytime soon. We’ll have another emergency summit on the weekend. But with the banks closed and seemingly running out of cash and no new proposals, the risk of Greece leaving the Euro is rising again.
– The wash up was extremely volatile in forex and commodity markets overnight — a solid bond rally, a big dip in European stock markets and a dip then recovery in US stocks. However, since US markets closed we have had a number of comments which are important indicators of where things might head in Greece. German chancellor Angela Merkel said new proposals are needed and they must have “stronger measures to plug financing gaps because of the economic deterioration.” That sounds like a difficult and high hurdle for the Greek prime minister given all that has happened already. And time is running out, according to EC president Donald Tusk, who said the “final deadline ends this week.” Even though forex and the oil markets recovered sharply from the selloff, volatility begets volatility. Something that Jean Claude Juncker hinted at this morning when he said “we have a Grexit scenario, prepared in detail.” Alexis Tsipras said he had submitted a “proposal aiming for socially just and economically viable agreement.” The situation remains fluid.
– There is plenty to occupy the minds of traders today. But, more than likely, risk managers are on the bridge reining in traders and fund managers and reducing positions, size and risk in the markets. What that will do is potentially increase volatility. This is how markets become fractured and unstable.
Here’s the overnight scoreboard (7.30am AEST):
- Dow Jones up 0.53% to 17,777
- Nasdaq up 0.11% to 4,997
- S&P 500 up 0.61% to 2,081`
- London (FTSE 100) down 1.58% to 6,432
- Frankfurt (DAX) down 1.96% to 10,676 /li>
- Tokyo (Nikkei) up to 20,376
- Shanghai (composite) down 1.26% to 3,728
- Hong Kong (Hang Seng) down 1.03% to 24,975
- ASX Futures overnight (SPI September) -15 points to 5,507
- US 10 Year Bonds -3 points to 2.26%
- German 10 Year Bonds -12 to 0.65%
- Australian 10 Year Bonds down 6 points 2.96%%
- AUDUSD: 0.7444
- EURUSD: 1.0989
- USDJPY: 122.45
- GBPUSD: 1.5458
- USDCAD: 1.2705
- Crude: $52.95
- Gold: $1,155
- Dalian Iron Ore (September): 349
– Futures are indicating a down day and given overnight events, makes more sense than the strong 1.94% rally seen on the ASX yesterday. The turmoil on the iron ore market, which absolutely collapsed overnight, the big miners such as FMG and others in the sector are likely to be a big drag on the index today.
– In Asia yesterday there were signs the CCP is losing the battle to halt the slide in Shanghai stocks. They suspended more than 100 stocks overnight, taking the total number to about one-third of those listed. That’s one way to try to stem the tide of selling. But in many ways it just dams the flow for a while. If the owners of these stocks own them on margin they will need to liquidate at some point. Or, in a developed stock market, they would need to sell other stocks they may hold. Either way Chinese regulators will win in the end. But for the moment the battle rages.
– Forex is turning down again since the raft of comments from European leaders. Euro is back under 1.10 and the Aussie has slipped to 0.7440ish and USDJPY (forex safe haven) is back at 122.45. As highlighted above, volatility begets volatility.
– Speaking of volatility… How was Nymex crude last night!? After making a low of $50.58 the front contraction then rocketed back above $53 before tanking a dollar once the flow of comments from Europe came in. It’s at $52.33 at the moment. Iron ore was crushed as highlighted above, coal has pulled back for the fourth day in a row, copper lost another 9 cents to $2.4750 and, strangely given all the turmoil, gold got hammered as well. It’s sitting at $1,155.
– On the data front in Australia today there are no releases.
And now from CMC Markets’ Ric Spooner is today’s Stock of the Day
Casino operator, Crown derives around half its earnings from its stake in the Macau based Melco Crown. China’s anti-corruption drive, new smoking regulations and the downturn in China’s property and stock markets are all negatives for this operation.
There is considerable division among analysts about whether this bad news is already reflected in Crown’s share price. From a chart point of view, Crown is having yet another crack at well established resistance around $13.20. If it does manage to crack through, the bulls may be vindicated.
Ultimately the 50% or 61.8% Fibonacci retracements around $14.10 and $14. 45 look like achievable objectives in this bullish scenario. However, to be conservative it might pay to wait and see if there is an initial pullback from the 200 day moving average and 38.2% retracement at $13.50 before spinning the wheel on Crown.
Ric Spooner, chief market analyst, CMC Markets
You can follow Ric on Twitter @ricspooner_CMC