Greece to have de facto referendum on staying in Eurozone

Global:

Greece continued to dominate the headlines, with no agreement reached by the close of markets. Events in Greece escalated dramatically over the weekend.

On Friday night Greece's PM Tsipras announced plans to hold a referendum on 5 July on whether to accept austerity measures required by creditors' in exchange for aid (by extension, effectively a vote on remaining inside the Eurozone).

Then on Sunday, the ECB decided to freeze the level of liquidity (ELA) to Greek banks at Friday's levels, just shy of €89bn.

This in turn catalysed an announcement that there would be a Greek bank holiday as of today.

On the weekend the People's Bank of China (PBoC) cut the official interest rate by 25 basis points and lowered the reserve requirement ratio for some lenders.

The events since Friday's close are net negative for market sentiment today, the Greek news dominating the PBoC stimulus.

Share Markets:

The US stockmarket was mixed, with the Dow rising 0.3%, the S&P 500 finishing flat and the Nasdaq down 0.6%. In Europe, stockmarkets were generally stronger, with the Euro Stoxx index up 0.3%.

In China the stockmarket had a weak session on Friday, with the Shangai Composite down 7.4%.

Interest Rates: 

US government bond yields rose as upbeat US consumer confidence data stoked speculation about the timing of the first rate hike.

Foreign Exchange:

The US dollar index edged higher on Friday on speculation about the timing of a rate hike from the Fed this year and spiked this morning on safe haven flows given developments in Greece.

The Euro opened sharply weaker this morning amid the deterioration in Greece's negotiations. EUR/USD is currently trading around 1.0970, down from 1.1167 at Saturday morning's close.

The US dollar fell against the Japanese Yen at the open this morning on safe haven flows. USD/JPY closed at 123.88 on Saturday morning and is trading around 122.40 at the time of writing.

The Aussie dollar drifted lower against the broadly stronger US dollar on Friday and fell at the open this morning with developments in Europe over the weekend driving safe haven flows.

AUD/USD is trading around 0.7600 at the time of writing. The Aussie gained against the Euro, but softened against Sterling.

The Kiwi fell to a five-year low against the US dollar, and has weakened versus the Aussie dollar.

Commodities:

Commodity prices were generally higher, led by grain price gains given adverse weather in growing regions in North America and Europe.

Australia:

There was no significant local economic data to report.

China:

The People's Bank of China (PBoC) cut the benchmark 1-year lending rate by 25 basis point to 4.85%.

Sharp equity market declines and rising money market rates appeared to be catalysts for the move. The rate cut is the fourth since November.

The PBoC also lowered the reserve requirement ratio for some lenders by 50 basis points.

For the year to May, industrial companies' profits rose 0.6%, down from an increase of 2.6% in the year to April.

Japan:

Japan's unemployment rate remained flat at 3.3% in May.

Job availability improved with the ratio of employment offers to seekers rising to 1.19 - the highest in 23 years - from 1.17 in April.

Core consumer prices rose 0.1% in the year to May.

The 'core-core' inflation index, which excludes food and energy prices, rose 0.4% in the year to May.

The aim of Japan's quantitative easing programme is to lift inflation towards 2%.

New Zealand:

The trade balance improved significantly in May to a NZ$350m surplus.

It defied a forecast deficit of NZ$100m, also improving from an upwardly revised surplus of NZ$183m in April.

Exports were higher than expected at NZ$4.36bn, while imports were below expectations at NZ$4.01bn.

United States: University of Michigan consumer confidence for June was revised up to 96.1, from the previously reported 94.6.

Rising house and equity prices appear to have contributed to the improvement in sentiment.



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