Via Dave Lutz at JonesTrading, here’s a quick guide to what trades are talking about this morning.
Good Morning! US Futures are taking the Greek Vote in Stride, off 60bp and steadily rallying back from the overnight lows as Varoufakis resigns, may signal Tsipras bringing new proposals, helping markets recover. No shock, but Europe is underperforming the USA with German markets off 1.2% led by a drop in the Fins. Peripheral Markets are faring worse, with Spain off 2% and Italy 3% as contagion fears from the overwhelming “no” vote weigh. Volumes quite benign in Europe as peeps await tomorrow’s Eurogroup and the ECB as it must decide whether to keep Greek banks alive. While Athens remains closed, The GREK ETF is marked 10% lower and nearing June lows, while NBG is offered 20% lower. Over in Asia, Shanghai initially opened 7% higher as PBOC threw multiple headlines at the selloff (No more IPOs, Brokerages must invest in market…), but heavy selling pressed the index to “only” a 2.4% gain. This hit Hong Kong for 3%, its worst selloff in 3years. Aussie lost 1% into the RBA decision tonight, while the Nikkei was 2% lower as haven trades pressed the Yen higher.
The US 10YY is off 9bp this AM and German Yields 6bp lower as the Greek Drama unfolds. Peripheral yields are rising — Greek 10’s are 3.5% wider to bunds this AM, dragging Portuguese, Spanish and Italian Yields higher. The Euro was initially hit below 1.1, but has recovered slightly as chatter the SNB was intervening (Selling Franc and Buying $US) — and the DXY is jumping to 1M highs, starting to rally against Yen again. This is a headwind for the commodity complex, and save Gold’s meager bounce, it’s a sea of red. Oil is getting crushed to 3M+ lows on concerns of slowdown (Greece turmoil), Heavy US Supplies, and an Iranian deal inching closer — Copper is off 3% as growth trades reverse sharply, while the Grain complex is quickly reversing last week’s USDA inspired gains. Aside from the slew of Greek Headers, we have a quiet session of catalysts — with Markit US Services PMI at 9:45 and ISM Non-Manf. Composite at 10. It’s pretty quiet in DC as Congress recovers from celebrating the US Women’s 5-2 win over Japan last night.