- Eurozone market conclude positive, volatile, week
- U.S. markets suffer negative week as hawkish comments draw yields higher
- Dow and S&P lose 0.4% during week
- Eurozone ministers reject Greek bailout extension, setting Tuesday as D-day
Market participants enjoyed an exciting, volatile, session last week, gaining from rapid developments in the Greek standoff with its creditors. The beginning of it was naively positive, actually, gaining optimism before the Eurozone leaders' summit. The Athens stock exchange opened Monday's session with more than a 6% increase, which quickly escalated to close to 10%. The positive momentum was also quite evident with the DAX opening Monday at +2.5%, and major indices recording similar gains. Tuesday marked the unravelling on accumulating disagreement with the IMF, which was reported to be displeased with the current Greek offering aimed at trimming its pension system's deficit. Likewise, Wednesday saw an IMF counter proposal rejected by the Greek government. The rest of the week's trading schedule saw growing carrot-and-stick tactics implemented by the troika.
Judging by the Eurozone equity indices, the week's events with Greece have been considerably better than expected – The Athens Stock Exchange Index surged 16%. The CAC 40 followed with a 5.06% gain and the DAX added 4.1%. The FTSE 100 was not as positive, on the other hand, concluding with a mere 0.64% weekly gain.
The markets' optimism, however, may have been premature, as Friday night saw Greek P.M. Tsipras announce a referendum in a televised speech, sending a clear uncompromising message to the Troika. AFP later reported that the Eurozone ministers have rejected the Greek bailout extension, making it impossible to conduct such a referendum, by the time the program expires, this Tuesday.
Global Markets heavy as monetary boost diminishes
Europe's bickering wasn't the only thing moving the markets this week. FOMC Member Jerome Powell gave 50% chance, on Tuesday, that the Fed would begin raising its interest rate as soon as September, followed by yet another increase in December. Yields in the U.S. increased, peaking as high as 2.42%, weighting on markets. On Wednesday, the U.S. Department of Energy reported a rather massive 4.93 bbl decrease of crude oil inventories. Apparently, expectations in the market have been for a larger decrease, as oil shares dropped in spite of trimming supply, oil prices lost some 2.2% following a mini-rally before the data. All and all, oil concluded the week at a price of 59.63 – very close to where it started it. Equity prices gained a slight nudge upwards from the news, with the S&P 500 (SPY) edging 0.16% upwards. The rest of the day, however, was quite negative with a 0.74% decline at the S&P – the largest daily decrease during the week.
Rate hike concerns have led yields upwards during the week as a whole, with the U.S. sovereign 2 year yield adding close to 10bp, to 0.71% and the 10 year going as high as 2.47%. These have left markets in the U.S. bruised, certainly compared to their European counterparts, with the S&P 500 and Dow (DIA) lost a total 0.4% during the week and the Nasdaq (QQQ) decreased no less than 0.7%.
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