Markets In-Review: Markets Weak On Greek Worries

 

•  European creditors attempt to impose deadline on Greece prior to June 30th deadline
•  Global stock markets' volatility rises on Greek worries, while performance remains weak
•  S&P 500 (SPY) adds mere 0.06% during week, while DAX loses negligible 0.01%
•  EUR/USD increases amid alleged Obama comments on Dollar strength
•  We see Greek issue continue to play major role in markets next week

The weekly trading session was home to volatility more than any distinctive direction. Stocks in the U.S have generally benefited from positive backwind, pulled back by a rather bumpy European road. The S&P 500 went through being at a 1% decrease, on Tuesday, compared to the beginning of the week and thorough +1% on Thursday. Most of this was later lost, however, ending at +0.06% during the week. The trend was very similar in the Dow Jones (DIA), seeing a 0.28% weekly gain, and the Nasdaq (QQQ), with a 0.34% weekly decline. The same broadly holds for stock indices in Europe – The DAX concluded the week with a -0.01% weekly micro-decline, which went through nearly -3% on Tuesday and as high as 2.3% on Thursday. Contrarily to those, some nice gains were recorded in China, with the SSE180 increasing 1.83%, summing to a tad more than 10% since the beginning of the month.

The "Greek debt crisis" once again triumphed as the largest driver for volatility this week. With the Greek postponement of all of June's payments to the 30th, one could have expected a rather serene month. The mutual exchange of comments between the parties, however, was quite loud.

European officials bicker via a barrage of comments

Early on Thursday, the International Monetary Fund expressed disbelief in the success of its negotiations with the Greeks, as it withdrew its negotiations team from Brussels where talks took place. IMF Spokesman Gerry Rice further added that "there are major differences between us in most key areas.” In retrospect, these comments have marked the transition from what was a generally positive move by global stocks, down to the aforementioned weak results they've ended with. The Germany DAX, for example, lost more than a percentage point, as the news broke.

Donald Tusk, the European Council president joined in later, commenting to reporters in Brussels that "we need decisions, not negotiations now. It's my opinion that the Greek government has to be, I think, a little more realistic." Implying that the Greek government is practicing misconduct, Tusk also added that "there is no more time for gambling." Greek Finance Minister Yanis Varoufakis fended off the allegations – "Contrary to stubborn rumours, we never gambled", he tweeted, linking to an article on the NY times, explaining his rationale for this.

On Friday, German Chancellor Merkel expressed a milder tone on the matter, in a speech in Berlin, saying that "where there's a will there's a way, but the will has to come from all sides … That is why I think it's right that we talk to each other again and again." We note that a Euro area finance ministers meeting set for Thursday is forming as the event where a resolution will be sought, so expect some volatility around that.

The USD suffered somewhat of a selloff in the beginning of the week, on rumors holding that president Obama said that the Dollar is too strong, seeing EUR/USD gain some 1.6% on Monday, slashing through the 1.12 mark, and hovering around 1.13. White house later denied that the comments were even made. Though that didn't seem to have a very significant effect on the currency. The aforementioned slew of European officials' commentary certainly had their fair share on swinging the Euro, seeing EUR/USD fall nearly as low as 1.1150, on Friday. Though eventually the currency pair concluded the week with a 1.37%, to 1.1266.