Last Gasp for Greece Saturday?: Morning Market Update June 26

June 26th, 2015 by

Greece’s creditors, mindful of voter anger at home and emboldening anti-austerity parties in other EU nations, has offered Greece an extension of the present bailout terms through November, increasing the available funds to €15.5 billion.

This presumes the current socialist government in Athens adhering to existing bailout terms, which has practically no chance of happening. Update: the Greek government has (angrily) rejected the proposal to extend the current bailout.

China’s two main stock markets dropped 7.4% and 7.9% today, as the government tries to rein in the alarming amount of stock that is being bought on margin (credit.) Government agencies have announced a crackdown on margin lending by unregulated entities.

Markets are swinging minute by minute on rumors coming from the last-minute negotiations in Europe.

Yesterday in the Markets

Spot gold closed $2.10 lower yesterday, with no big swings in trading. Platinum was well-bid, gaining $10 an ounce, while palladium continues to get hammered, losing $17 an ounce.

First-time jobless claims came in slightly better than expectations, with 271,000 losing their jobs last week (a gain of only 3,000 over last week.)

West Texas Intermediate crude dropped by 1% to close under $60/bbl, while Brent saw modest losses to close at $63.34

Factors Affecting Gold Today

tragedyA meeting between EU leaders broke up yesterday with no resolution. German chancellor Merkel told reporters “We bet everything for a solution to be found on Saturday.” She and French president Hollande agreed that there would be no more meetings of national leaders after tomorrow’s negotiations.Leftist Greek prime minister Tsipras refused to issue a statement to reporters, waiting until he was safely ensconced in Athens before hurling accusations of “blackmail and ultimatums.”

German Finance Minister Schaeuble said that the Greek plan of “more taxes, no cuts” was unfeasible, considering that the government in Athens only collects a fraction of the current taxes owed it. He warned Tsipras that the leaders of the other EU countries had to answer to voters too. The taxpayers of the creditor nations are becoming increasingly angry over Greece’s refusal to reform their broken system, even after being given better deals than Spain, Portugal, and Ireland got.

Bloomberg quotes Konstantinos Drakakis, a Greek hedge fund officer who has lived in Dublin since 2006, on his thoughts regarding another Greek bailout. “It’s like giving money to a drug addict. He’s going to spend it and ask for money again later. Greece has lots to learn from Ireland.” He said that the reason Ireland has recovered from its bailout and earned an A+ rating for its bonds it that it took a capitalist approach to recovery, instead of the socialist approach of Greece.

terroristTerrorist attacks struck from France to Kuwait today. A worker was beheaded and his head put on a fence in an attack on a U.S.-owned gas plant in France that led to damage to the facility. In Tunisia, a lone gunman opened up with automatic weapons fire on a tourist beach, killing at least 27. And in Kuwait, a suicide bomber detonated himself in a crowded Shiite mosque. The so-called Islamic State terrorist army took responsibility for that attack.

Morgan Stanley warns that the worst is not over for Chinese stock markets, despite a 7.4% loss in the Shanghai index and a 7.9% loss in the Shenzhen index. Worst case scenario? Another 30% drop.

looking-aheadLooking Ahead

Saturday is supposedly the “last ditch we really mean it” meeting over the Greek debt crisis.

Economic reports on Monday include EU economic sentiment (bad numbers will be blamed on Greece), German CPI, and pending home sales in the U.S.

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