Daily Market Reports | Jun 25 2015
By Greg Peel
The Dow closed down 178 points or 1.0% while the S&P lost 0.7% and the Nasdaq lost 0.7%.
Flat
A very lacklustre day on Bridge Street yesterday saw the ASX200 struggle over 5700 without great conviction before falling back to be little changed on the session. The telco gained some support, rising 0.9% as consumer discretionary copped a 1% sell-off, but elsewhere sector moves were mixed and negligible.
It would appear that we’ve reached another “where to now?” level having rebounded a couple of hundred points in the ASX200 following the 500 point fall from this year’s post-GFC high. Continuing to buy yield is a risky business as Fed rate rise talk heats up and right now, Greece is a watch and wait situation.
There are only four sessions left in FY15 which should imply some last minute argy-bargy, tax-loss selling, window dressing, and general volatility but we certainly didn’t see any of that yesterday.
Deflated
The enthusiasm generated early this week by a belief the Greek drama was about to come to a happy ending always seemed a little premature, given the response from the creditors to Tsipras’ latest concessions was one of “a step in the right direction” rather than “we’ve reached agreement”. This implied further concessions were still required, and Tsipras has already risked the rejection of the Greek parliament in bowing to creditor demands in any way, shape or form.
The latest eurozone finance ministers’ meeting broke up last night without resolution, and door-stop comments from ministers as they left the meeting were more indicative of ongoing stalemate than any progress having been made. The Austrian, Finnish and even Spanish (people in glass houses?) ministers all suggested Greece had not brought them anything new.
One would have to think Greece is at this stage moving closer to default than to receiving its bail-out funds. The risk for Greece is that a Grexit would prove more devastating to the Greek economy in the short term than the austerity the country is already suffering from. The risk for the creditors is that if they offer concessions to Greece, every subsequent eurozone member general election will install a left wing anti-austerity party which will queue up to receive the same treatment.
Notwithstanding the risk that continuing to support Greece will mean pouring money into a black hole for most of eternity, and having more of these tiresome bail-out negotiations every time.
But the biggest risk for the eurozone is that Greece exits, suffers near term hardship, yet thanks to a much devalued drachma is able to quickly rebuild a viable economy, free of lingering debt burdens thanks to IMF loan and sovereign bond default. That would signal the beginning of the end for the (failed?) experiment.
Jitters
The US March quarter GDP result was last night revised to minus 0.2% growth from a prior minus 0.7%. No one blinked because (a), the number matched forecasts and (b), it’s history. On Wednesday we’re into the September quarter.
It was a soggy day on Wall Street largely as the Greek news filtered out, but also because billionaire investor Carl Icahn appeared on CNBC as a “public service” to tell retail investors US stock markets were becoming overheated. No one is sure which company’s shares he’s looking to buy, but he did manage to get the Dow down 1%.
Icahn did say, nonetheless, that he still liked Apple, of which he owns a decent slice, and so Apple was the only Dow stock to finish in the green on the day. It’s not known whether Icahn was taking profits.
Granted, the Nasdaq and Russell have hit new all-time highs but the S&P500 has not moved since March. If Wall Street is overheated now, it must have been overheated then.
The US ten-year bond yield fell back 4 basis points to 2.37% last night as Greek risk heightened again and the US dollar index came off 0.2% to 95.28.
Commodities
Copper was the only base metal to post a positive move on the LME last night as all others fell. No move exceeded 1%, but Greek concerns were cited.
Iron ore suddenly decided to jump US$1.20 to US$61.70/t.
Gold is US$3.50 lower at US$1174.80/oz.
The weekly US inventory report, released last night, showed an unexpected rise in both crude production and gasoline supply. West Texas fell US86c to US$60.22/bbl and Brent fell US88c to US$63.59/bbl.
The Aussie is down 0.4% to US$0.7706.
Today
The SPI Overnight closed down 9 points.
Greek negotiations continue tonight.
Today is stock options expiry day on the ASX. This may spark some individual stock volatility, but stock options are nowhere near as widely held as index options, which expired last week and caused a lot of volatility.
Rudi will appear on Sky Business' Lunch Money, noon-12.45pm.
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