On 26 June, 2015 – Greece closes banks, China cuts rates

Stocks were mixed Friday and for the week as negotiations between Greece and its creditors (European Commission, European Central Bank and the International Monetary Fund) deteriorated.
After markets closed for the week Friday, Greek Prime Minister Alexis Tsipras announced that a referendum would be held on July 5 on its creditors’ proposals. On Saturday, Eurozone finance ministers rejected a Greek request for a one month extension to its bailout program. On Sunday, the European Central Bank announced that it would freeze the amount of emergency loans it supplied to keep the Greek banking system afloat. Greece subsequently moved to close its banks and impose capital controls to prevent financial chaos following the breakdown of bailout talks with its international creditors. Both banks and the stock market will be closed on Monday in Greece.
United States
Stocks closed mostly lower Friday prior to the weekend’s events as negotiators continued to work toward a solution to Greece’s debt problems. While the Dow Jones industrials added 0.3%, the Nasdaq retreated 0.6% while the S&P was virtually unchanged on the day. The three indices were down for the week. The Dow and S&P both lost 0.4% and the Nasdaq 0.7%.
During the Friday global market day, global investors watched the Greek debt talks closely. On Thursday, a key meeting of Eurozone finance ministers on Greece’s rescue package broke up without an agreement. The 19 ministers were due to meet again Saturday. While Greece has been the main driver in financial markets recent weeks, worries over China have climbed up the list of concerns. On Friday, Chinese stocks plunged more than 7%.
Nike advanced after the company posted quarterly results that beat expectations. Micron Technology led the semiconductor sector lower after reporting weaker than expected third quarter results and providing disappointing guidance.
University of Michigan’s final reading of June consumer sentiment was 96.1, up from the preliminary reading of 94.6. Investors have been keeping a close eye on data to see if the US economy has recovered from a slow start at the beginning of the year. The Federal Reserve said it remains data dependent and expects to raise rates when it sees a sustained rebound in the economy.
Gold at the afternoon London fixing was down US$2.15 to US$1,170.50. Copper futures were up 0.6% to US$2.64. WTI spot crude was down 7 US cents to US$59.63. Dated Brent spot crude was up 6 US cents to US$63.26. The US dollar was up against the euro, yen and the Canadian and Australian dollars. It was virtually unchanged against the pound. However, it declined against the Swiss franc. The Dollar Index was up 0.2%. The yield on US Treasury 30 year bond was up 7 basis points to 3.24% while the yield on the 10 year note added 6 basis points to 2.47%.
Europe
Stocks were mixed Friday as investors weighed the possibility of a successful outcome to last-ditch Greek talks. The FTSE lost 0.8% and the SMI was down 0.4%. However, the CAC and DAX added 0.3% and 0.2% respectively. For the week, all four indices advanced. The FTSE was up a modest 0.6% while the CAC, DAX and SMI added 5.1%, 4.1% and 1.6% respectively.
K+S AG soared after people familiar with the matter said the German potash supplier may reject as too low a takeover offer from Canadian fertilizer producer Potash Corp. of Saskatchewan. Tesco gained after the UK’s biggest supermarket chain posted a smaller than forecast decline in quarterly sales. J Sainsbury and Wm Morrison Supermarkets also were up. Commodity producers including Anglo American and BHP Billiton were lower. ARM Holdings declined on a broker downgrade as did Petrofac. Deutsche Bank and Commerzbank advanced. Automakers Peugeot and Renault gained.
The markets had bounced back in the afternoon on reports that Greece’s creditors have proposed a five-month extension of its current bailout program if the government agrees to a set of reforms. However, the disbursement would be possible only if the Greek parliament approves the proposal and adopts the first set of reforms. The offer will also require approval from other Eurozone parliaments.
Asia Pacific
Stocks mostly retreated Friday with only the Kospi edging up 0.2% on the day and 2.1% on the week. However, the selloff accelerated in China. The Shanghai Composite plunged 7.4% on Friday after dropping 3.5% Thursday. For the week, the index was down 6.4% after sinking 13.3% the week before. The 7.4% drop now ranks as the second biggest this year, behind a 7.7% plunge on January 19. The index now is down 18.8% since a multi-year closing high of 5,166.35. That leaves the index very close to entering bear market territory, defined as a decline of 20% from a peak.
Over the weekend, the People’s Bank of China lowered its one year benchmark bank lending rate by 25 basis points to 4.85% and reduced the one year benchmark deposit rate by 25 basis points to 2%. The Bank also lowered the reserve requirement ratio (RRR) for banks that have met certain standards in lending to the farm sector and small and medium-sized enterprises by 50 basis points. It lowered reserve requirement for finance companies by 300 basis points, which it said will help ease funding and cost pressures on state-owned enterprises.
Elsewhere, shares declined as the Greek debt talks dragged on without a deal. The Nikkei retreated 0.3% after a mixed bag of economic data was released before the market opened. While Japan’s consumer price inflation rose marginally in May from a year earlier, the jobless rate held steady at 3.3% and household spending advanced for the first time in 14 months, adding to expectations that the Bank of Japan will hold off expanding stimulus for now. The index was up 2.6% for the week.
Both the S&P/ASX and All Ordinaries dropped 1.5% as the Greek debt saga, lower commodity prices and the continued sell-off in Chinese stocks kept investors wary. BHP Billiton tumbled after flagging job losses at its Adelaide offices. Rival Rio Tinto and Fortescue Metals Group also retreated. The big four banks closed down for the day. On the week, the S&P/ASX and All Ordinaries lost 0.9% and 1.0% respectively. The Sensex was down 0.3% but added 1.8% on the week.
Global Stock Market Recap

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Looking forward*
Monday — Japan posts May industrial production and retail sales. The eurozone reports EC economic sentiment and Germany releases preliminary June consumer price index. Canada posts industrial product price index for May. In the US, May pending home sales and June Dallas Fed manufacturing index will be released.
Tuesday — Germany’s May retail sales and June unemployment are released along with French consumer manufactured goods consumption and French May producer price index. The UK posts its final revision to first quarter gross domestic product. The Eurozone releases June flash harmonized index of consumer prices and May unemployment. Italy posts both consumer and producer price indices. Canada posts April monthly gross domestic product. In the US, April S&P/Case Shiller price indices and June Chicago PMI and consumer confidence are on tap.
Wednesday — Final June manufacturing PMIs will be released for China, Japan, India, the Eurozone and member states, the UK and the US. China June CFLP manufacturing PMI will also be posted. In the US, June ADP private employment report, June ISM manufacturing survey and May construction spending will be released.
Thursday — Australia posts May merchandise trade balance. The Eurozone posts May producer prices. The UK reports June construction PMI. The European Central Bank publishes the minutes of its governing council meeting of June 3. In the US, June employment situation and May factory orders along with weekly jobless claims, money supply and Fed balance sheet will be reported.
Friday — June composite PMIs will be released for China, Japan, the Eurozone, Germany and France while services PMIs are posted for India and the UK. Eurozone May retail sales will also be posted. It is a holiday in the US and all markets are closed.
*Note — all releases are listed in local time.