On 29 June, 2015 – Greek standoff sends stocks tumbling

The standoff in Greece sent global stocks tumbling. However, after initially dropping when markets opened Monday morning in Asia, the euro rallied and the US dollar retreated.
United States
US stocks joined those in Europe and the Asia Pacific and dropped Monday. Selling accelerated just before the close. The Dow Jones industrials dropped 2.0%, the S&P lost 2.1% and the Nasdaq retreated 2.4%.
The selling came as Greece shut down its banking system and the Bank of Greece moved to impose controls to prevent money from leaving the country. On Monday, a senior Greek government official said the country would not make a debt repayment to the International Monetary Fund due June 30. Traders said the selling was broad based, and that trading volumes were only slightly higher than in past trading sessions. The biggest decliners Monday were the sectors that have recently seen the biggest gains, including shares of financial and consumer discretionary companies.
In addition to worries about Greece, renewed worries over Puerto Rico’s ability to pay its debts and continued weakness in China, where stocks closed in bear market territory, also vexed investors. Athens will hold a Sunday referendum on whether to accept the austerity measures demanded by its creditors in exchange for further aid. The Eurozone has rejected Greece’s request for a one month extension to its bailout.
Gold at the afternoon London fixing was up US$5.50 to US$1,176.00. Copper futures were down 0.1% to US$2.63. WTI spot crude was down US$1.47 to US$58.16. Dated Brent spot crude was down US$1.38 to US$61.88. The US dollar was up against the pound and the Canadian dollar. However, it declined against the yen, euro, Swiss franc and the Australian dollar. The Dollar Index dropped 1.5%. The yield on the US Treasury 30 year bond was down 16 basis points to 3.08% while the yield on the 10 year note was down 15 basis points to 2.32%.
Europe
The European markets ended Monday’s session solidly in negative territory, but managed to finish off their lows, thanks to the modest dip in the US markets. Financial stocks were the hardest hit after bailout negotiations between Greece and its creditors broke down over the weekend. The country apparently will not pay the €1.6 billion due the International Monetary Fund on June 30th. The FTSE declined 2.0% and the SMI was 1.5% lower. The CAC and DAX dropped 3.7% and 3.6% respectively. But the larger losses occurred in Italy and Spain where the MIB sank 5.2% and the IBEX lost 4.6% respectively.
On Friday night after markets worldwide had closed for the week, Greek Prime Minister Alexis Tsipras called a snap election for July 5 to vote on the Troika’s proposals. Subsequently, the European Central Bank decided not to raise the emergency funding it was providing the Greek banks following a conference call on Sunday. The current cap of the emergency liquidity assistance, a crucial life-line for cash-strapped Greek banks, is €89 billion. Greece then was forced to close its banks and imposed capital controls Monday in order to avoid a financial collapse. The banks will remain closed until July 6th and a daily limit of €60 on cash withdrawals from ATMs is in place. The Greek stock market will remain closed this week as well as next.
Deutsche Börse dropped after the stock exchange operator announced that it is in negotiations with SIX Group regarding a full acquisition of the joint venture companies STOXX and Indexium for a purchase price of 650 million Swiss francs. Volkswagen dropped on a report the automaker plans to launch a family of low cost budget cars in China in 2018. Daimler and BMW also retreated. Banks in Germany and France including Deutsche Bank, Commerzbank, Société Générale, Crédit Agricole and BNP Paribas declined. Travel stocks, due to the terrorist attack in Tunisia Friday, retreated. They included TUI, International Consolidated Air Group, InterContinental Hotels Group and Thomas Cook Group. In the UK, Barclays, Standard Chartered, HSBC, Lloyds Banking Group and the Royal Bank of Scotland also finished lower.
Asia Pacific
Asian shares dropped Monday after Greece shut its banking system and imposed capital controls to halt bank runs following unsuccessful talks with its creditors. As heightened fears of a Greek default and its possible exit from the Eurozone sparked a flight to safety, investors shrugged off the Chinese interest rate and reserve ratio cuts over the weekend.
The Shanghai Composite plunged further to enter bear market territory despite the surprise interest rate cut from the People’s Bank of China over the weekend. After a roller coaster ride, the Shanghai Composite sank 3.3%, extending losses from the past two weeks. The index initially climbed 2.5% in early trade. However, later, the index dropped as much as 7.6% before recouping some of its loss to end the session off its day’s lows. The Hang Seng meanwhile, lost 2.61%.
The PBoC 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 the requirement for finance companies by 300 basis points, which it said will help ease funding and cost pressures on state-owned enterprises.
The Nikkei dropped 2.9% to a more than one-week low after Greece unexpectedly called for a referendum on the final EU offer for a five-month extension of the country’s bailout program. The yen gained ground on risk aversion and economic reports painted a mixed picture of the economy, further dampening investor sentiment. May industrial production dropped 2.2% on the month while retail sales added 3.0% on the year. Mazda Motor, Nippon Soda, Nippon Electric and Takashimaya dropped as did banks Mitsubishi UFJ Financial, Mizuho Financial and Sumitomo Mitsui Financial. Advantest, Panasonic, Fast Retailing, Canon and automaker Honda Motor declined.
Both the S&P/ASX and All Ordinaries dropped 2.2%. The four big banks retreated while miners were mixed. The Kospi lost 1.4% marking its biggest single day loss since May 27. The Sensex was down a relatively benign 0.6%.
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*
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.
*Note — all releases are listed in local time.