Markets sell off as Greek default looms - 30.6.2015

US stocks plunged on Monday after negotiations between creditors and Greece fell apart as Greek Prime Minister Alexis Tsipras on Saturday called for a snap referendum on whether to accept or reject bailout extension proposal. S&P 500 fell 2.1% to 2,057.64, suffering biggest one-day drop in 2015 and turning negative for the year. The dollar traded lower as US Treasury prices fell to one-week lows, with the US Dollar Index closing down 0.45%. The call by Puerto Rico governor for the commonwealth to be allowed to restructure its $73 billion debt under US bankruptcy code as it is insolvent and will soon run out of cash also weighed on market sentiment. In economic news US pending-home sales in May rose to the highest level in over nine years. Market reaction to the positive news from housing market was muted. Trading volume was high as 7.3 billion shares changed hands on US exchanges, about 15.8% above the monthly average. Today at 14:00 CET April Case-Shiller Composite Index will be published. The tentative outlook is positive. At 14:45 CET June Chicago PMI will be released. The tentative outlook is positive. And at 15:00 CET Conference Board Consumer Confidence Index for June will be released. The tentative outlook is positive.

European stocks tumbled on Monday as the Greek parliament authorized June 5 referendum called by Prime Minister Alexis Tsipras. The Stoxx Europe 600 fell 2.6%, suffering its sharpest decline since October. German DAX 30 and France’s CAC 40 dropped 3.6% and 3.7%, recording worst losses since November 2011. Euro fell against most currencies but ended nearly 1% higher against the dollar after dropping earlier. Athens imposed capital controls and announced bank holidays until June 6 to prevent the collapse of its banking system from mass deposit withdrawals after European Central Bank refused to provide additional funds to Greek banks through Emergency Lending Assistance on Sunday. A senior Greek official said that Greece won’t be able to make the 1.54 billion euro loan repayment to the International Monetary Fund today. IMF Head Christine Lagarde has said she would notify the IMF Board immediately if Greece misses June 30 payment, which could trigger cross-default provisions for other bailout loans. The bailout expires today, and Greece faces another IMF repayment of 3.5 billion euros on July 20. Standard & Poor’s Ratings Services today lowered Greece’s credit rating further into junk territory from “CCC” to “CCC minus”, putting the probability of Greece exiting the euro-zone at 50%. It estimates that a commercial default is inevitable within the next six months unless circumstances change. Today at 10:00 CET June consumer price index and unemployment rate will be released in euro-zone. The tentative outlook is negative.

Nikkei gained 0.6% today after second-biggest daily drop yesterday, with yen ending flat against the dollar following a fall to one-month low on Monday. Tomorrow at 00:50 CET Tankan survey results for second quarter will be released in Japan. The tentative outlook is positive. At 2:35 CET final Manufacturing PMI for June will be released. The tentative outlook is neutral.

Oil prices are falling today after closing lower yesterday as investors are worried about the impact of Greece debt crisis on financial markets.

Gold prices are falling today after closing higher on Monday as uncertainty over Greece debt crisis boosted demand for safe haven metal.