MARKETS AT A GLANCE
LAST CHANGE % CHG
DJIA 17596.4 -350.33 -1.95%
Nasdaq 4958.47 -122.04 -2.40%
S&P 500 2057.64 -43.85 -2.09%
Japan: Nikkei 225 20110 -596.2 -2.88%
Hang Seng 25967 -696.89 -2.61%
Shanghai Composite 4053.03 -139.84 -3.34%
S&P BSE Sensex 27645.2 -166.69 -0.60%
Australia: S&P/ASX 5422.5 -123.4 -2.23%
UK: FTSE 100 6620.48 -133.22 -1.97%
PRICE CHG YIELD%
U.S. 2 Year 5/32 0.641
U.S. 5 Year 20/32 1.622
U.S. 10 Year 1 9/32 2.326
Australia 10 Year 29/32 2.961
China 10 Year -3/32 3.66
India 10 Year 0/32 8.063
Japan 10 Year 9/32 0.442
German 10 Year 1 5/32 0.799
LAST(MID) CHANGE
Australia $ (AUD/USD) 0.7681 0
Yen (USD/JPY) 122.52 -0.03
S. Korean Won (USD/KRW) 1120.16 0
Chinese Yuan (USD/CNY) 6.2055 -0.0031
Euro (EUR/USD) 1.124 0.0004
WSJ Dollar Index 86.3 -0.01
LAST CHANGE % CHG
Crude Oil 58.23 -1.4 -2.35%
Brent Crude 62.59 -1.25 -1.96%
Gold 1179.1 5.9 0.50%
(Data as of approximately 5 p.m. ET)
SNAPSHOT:
U.S. stocks fell sharply while investors piled into U.S. Treasury bonds and sent gold prices higher as Greece's debt crisis jolted global markets. Global oil prices slumped as the crisis prompted investors to move out of riskier assets like commodities. The euro gained against the dollar as investors exited bets in European equities.
OPENING CALL:
EUR/USD staged a strong recovery overnight, trading at 1.1244 early in New Zealand after sinking as low as 1.095 overnight. The market appears "to be placing its faith in the ECB to 'do whatever it takes' to protect the euro, whatever the outcome in Greece," says BNZ FX strategist Kymberly Martin. While Greece will remain the focus for some time, attention will also return to broader eurozone fundamentals this evening, as unemployment and CPI data are released, says Martin. In economic news, South Korea is scheduled to report May industrial production, which is expected to fall by 1% from the prior month and 3.1% on the year.
EQUITIES:
U.S. stocks tumbled, wiping out gains for the year, as a worsening in Greece's debt crisis jolted global markets and pushed the country closer to an exit from the eurozone.
The sharp declines came as Greece shut down its banking system and its central bank moved to impose controls to prevent money from leaving the country. A senior Greek government official said the country won't make a debt repayment to the International Monetary Fund due Tuesday. Stocks fell to session lows as Standard & Poor's subsequently said it saw a 50% likelihood of Greece eventually exiting the eurozone.
Traders said the selling was broad-based. Trading volumes were slightly elevated, with 7.3 billion shares changing hands compared with the year-to-date average of 6.5 billion shares. The biggest decliners were the sectors that have recently seen the biggest gains, including shares of financial and consumer discretionary companies.
"People are getting nervous, as what seems like all of a sudden out of the blue, you have multiple hot spots," said Ian Winer, head of equity trading at Wedbush Securities. "They're just trying to protect their gains on the year and position themselves in the event that this becomes a more dramatic selloff."
In addition to worries about Greece, investors also grappled with renewed concerns over Puerto Rico's ability to pay its debts after its governor said the island nation may not be able to repay all its outstanding debt in full. There was also continued market weakness in China, where stocks closed in bear-market territory, defined as a fall of 20%. China's central bank cut interest rates over the weekend, but the move did little to boost Chinese shares.
As global stock markets fell, traders and strategists said their current consensus view is that stocks will hold up better than a few years ago when worries about debt problems in Greece snowballed into angst about the financial stability of bigger economies such as Spain and Italy. Worries of such a spillover jolted European markets in the summer of 2011, sending the Stoxx Europe 600 index down more than 20% between July and September of that year.
Athens will hold a July 5 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.
Developments in Greece's debt situation have been driving action in U.S. markets in recent sessions. While turmoil in Greece and a potential exit from the euro won't change the outlook for most U.S. companies, the uncertainty is making some U.S. investors cautious. And it comes at a time when many investors remain worried about elevated valuations on stocks, the slow pace of earnings growth and the path of U.S. interest rates.
The path of U.S. interest rates could grab the spotlight away from Greece later this week. Economic reports culminate with Thursday's release of the June employment report. Nonfarm payrolls are expected to increase by 230,000 in June, down from 280,000 in May, according to economists surveyed by The Wall Street Journal. Federal Reserve officials consider labor market and inflation data as they debate when to raise short-term rates. Those rates have been held near zero since December 2008. A strong report could bolster expectations of a rate increase later this year.
FOREX:
Investors bought the euro, exiting bets in European equities that had involved selling the common currency, even amid growing concerns that the latest developments in the Greek debt crisis would send the currency lower.
The euro appreciated against the dollar despite increased tensions between the Greek government and its international creditors over the weekend, which is rattling markets, calling into question Greece's place in the eurozone and throwing into doubt the very integrity of the common currency itself.
Investors outside Europe continued to exit positions in eurozone equities and buy back euros they had previously sold to shield their stock picks from adverse currency moves, said David Woo, head of global rates and currencies research at Bank of America Merrill Lynch.
"If European stock markets go down, investors don't want to be over-hedged and don't want the currency risk," Mr. Woo said. "The markets have been seeing a negative relationship between European equities and the euro for a while. I'm not certain of the direction of causality between these two things, but this is clearly a factor."
In addition, investors continue to close out those bets that involve borrowing the low-yielding euro and selling it to fund trades for riskier, higher-yielding emerging-market currencies. Exiting the popular trades involves purchasing the euro, investors say.
The moves highlight the degree to which investors have struggled to interpret how risks would affect currencies, particularly growing uncertainty surrounding when the Federal Reserve would raise borrowing costs and whether Greece's substantial debts would ultimately push it from the eurozone and upend financial markets.
Several factors have lifted the euro against the greenback over the past couple of months, as negotiations between Greece and its creditors--the European Central Bank, the European Commission and the International Monetary Fund--have failed to advance toward a deal that would help the beleaguered country repay its debts.
BONDS:
The escalating debt crisis in Greece sent investors piling into the haven of government bonds in the U.S., Germany and the U.K., fueling the biggest one-day decline in the benchmark 10-year Treasury yield since 2011.
Investors flocked out of global stocks. Greece's government bonds plunged, and the selloff spilled over into government bonds in weaker economies of the eurozone, namely Spain, Portugal and Italy.
The Treasury bond market had sold off Friday on optimism that a debt deal would be reached over the weekend as the current bailout funding for Greece expires on Tuesday. But a series of events unfolding since late Friday have jolted investors' sentiment.
After a breakdown of debt talks with international creditors, Greece imposed capital controls and declared bank holidays. Greece's government called a referendum for July 5 on whether to accept austerity measures demanded by the country's creditors in exchange for further aid.
Investors are worried a default could drive Greece to leave the eurozone, commonly referred to as "Grexit" or Greek exit, which would threaten the stability of the financial system in the eurozone, jeopardize the region's economic growth and spark broad market turmoil.
"The risk of Grexit has increased markedly following the weekend events, " said Mark Nash, portfolio manager at Invesco Ltd., which manages $812.4 billion as of May 31. "Haven bonds will do very well" if Greece's debt crisis continues to deteriorate.
Standard & Poor's Ratings Services downgraded Greece's credit ratings deeper into junk territory, while speculating that the probability the country will exit the eurozone is roughly 50%.
Uncertainty over Greece has caused broad swings in global financial markets this month. The development comes as investors are grappling with uneven economic growth globally, a divergent path of central banks' interest-rate policies and growing concerns over valuations in many stocks and bonds.
For the moment, the selloff in global markets remains modest compared with the rout in 2012, the last time fears were heightened over a default in Greece and its potential departure from the eurozone.
(MORE TO FOLLOW) Dow Jones Newswires
June 29, 2015 17:38 ET (21:38 GMT)
Investors say the private sector's exposure to Greek government bonds has been significantly reduced following the 2012 bailout. The eurozone's banking system has been more resilient this time following stress tests and strengthened banking regulations.
Meanwhile, the European Central Bank's monetary stimulus over the past three years has sent government-bond yields in the eurozone's periphery countries sharply lower from highly stressed levels. The ECB can step up again if the Greek crisis threatens the eurozone's financial stability and growth outlook, said investors and analysts.
COMMODITIES:
Global oil prices slid to a more-than-two-month low as uncertainty about the financial crisis in Greece prompted investors to move money out of riskier assets like stocks and commodities.
The Greek government confirmed it won't be able to make a loan repayment to the International Monetary Fund due Tuesday, adding to concerns that the country may have to abandon the euro.
A Greek departure from the euro would be bearish for oil markets, analysts said. Such a move would likely strengthen the dollar, making oil more expensive to buyers using other currencies.
In addition, the Greek crisis could lead to an economic slowdown in Europe, reducing demand for oil, said Jim Ritterbusch, president of energy-advisory firm Ritterbusch & Associates.
"It tends to conjure up images of a slowed European economic growth path, and that seems to be what the market's fixated on," Mr. Ritterbusch said. "I think it's related to a broad-based risk-off environment that's playing out in sharply lower equity markets globally" as well as in the oil market.
Market participants are also closely watching news from Iran, where it remains uncertain whether an agreement on Iran's nuclear program can be reached by Tuesday's deadline. If a deal can be reached, it could allow Iran to begin exporting crude to global markets, adding barrels to an already-oversupplied market.
Global oil production continues to exceed consumption. Though traders have focused in recent weeks on shrinking U.S. crude-oil stockpiles, inventories are still growing in Europe. Crude supplies reached 60.6 million barrels in June in the key European oil hub of Amsterdam, Rotterdam and Antwerp, the highest level in at least two years, according to data provider Genscape Inc.
Last year's dramatic drop in oil prices is continuing to reverberate through the industry and forcing oil producers to cut future spending. Brazilian state-run oil company Petroleo Brasileiro said that it has cut its spending plan for the next five years and lowered its domestic production target to 2.8 million barrels of oil equivalent a day by 2020, down from its prior target of 4.2 million.
In the precious metals market, gold prices climbed to a one-week high as some investors bought gold as hedge against a potential Greek debt default.
TODAY'S HEADLINES:
Greece to Default on IMF Payment
Greece confirmed it won't be able to make a $1.73 billion loan repayment to the International Monetary Fund due Tuesday, after its decision to call a bailout referendum cast the country into uncharted waters. Global stock markets declined after Athens imposed capital controls in a bid to prevent a banking collapse.
Puerto Rico Urges Concessions From Creditors
Puerto Rico released a report calling for concessions from the island's creditors in order to stave off a looming cash crunch and take steps toward achieving fiscal health.
Top Iranian Officials to Join Nuclear Talks Tuesday
Iranian President Hasan Rouhani's brother and Tehran's top nuclear official will join negotiations with the U.S. Tuesday, in a sign that more than 18 months of diplomacy is entering the final stages.
High Court Strikes Down EPA Limits on Mercury Emissions
A divided Supreme Court threw out the EPA's first-ever rules requiring power plants to cut emissions of mercury and other toxic air pollutants, a significant blow to the Obama administration's environmental agenda.
GE Strikes Multibillion-Dollar Deals to Sell Units
General Electric has agreed to sell its U.S., Mexico, Australia and New Zealand vehicle-financing businesses to Element Financial for $6.9 billion, with a deal to unload its European fleet business also in the works.
U.S. Pending Home Sales at Highest Level in Nine Years
A forward-looking indicator of home sales rose to its highest level in more than nine years in May, a sign the housing market is gaining traction after a shaky start to the year.
Supreme Court Denies Google Appeal on Oracle Suit
The Supreme Court denied a Google appeal that sought to stop a billion-dollar Oracle lawsuit by seeking limits on software copyright protections.
Sysco Walks Away From US Foods Merger
Food-distribution giant Sysco scrapped its planned merger with rival US Foods, days after a federal judge halted the deal.
KKR Settles With SEC for Nearly $30 Million
KKR agreed to pay nearly $30 million to settle charges that it improperly shifted more than $17 million in so-called "broken-deal" expenses to its funds, breaching its fiduciary duty.
Discovery Buys European Olympic Broadcast Rights
Eurosport parent Discovery Communications reached a deal to pay EUR1.3 billion for exclusive European broadcast rights to the Olympic Games on all platforms for 2018 through 2024.
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TODAY'S CALENDAR:
(All times GMT, followed by country and event)
2100 SKA Jul Business Survey Index
2245 NZ May Building Consents Issued
2300 SKA May Service Industry Activity Index
2300 SKA May Industrial Production Index
0100 NZ Jun ANZ Business Outlook
0130 AUS May Financial Aggregates, incl Private Sector Credit
0200 SIN May Money Supply
0200 SIN May Bank Loans
0400 JPN May Auto exports
0400 JPN May Auto production
0401 MAL May PPI
0430 JPN May Preliminary Report on Petroleum Statistics
0500 JPN May Housing Starts
0500 JPN May Construction Orders
0630 AUS May International Reserves & Foreign Currency Liquidity
0700 THA May Industrial Production Index
0815 HK May Money Supply
0900 MAL May Money Supply
0430 JPN May Preliminary Report on Petroleum Statistics
0500 JPN May Housing Starts
0500 JPN May Construction Orders
0600 GER May Retail Trade
0645 FRA May Household consumption expenditure in manufactured goods
0645 FRA May PPI
0800 ITA May Unemployment
0800 GER Jun Labor market statistics (incl unemployment)
0830 UK Q1 Quarterly national accounts (GDP)
0830 UK Apr UK monthly service sector figures
0830 UK Q1 Business investment revised results
0830 UK Q1 Balance of Payments
0840 UK Reserve Bank of Australia Governor Glenn Stevens speech in London
0900 ITA Jun Cities CPI
0900 ITA Jun Provisional CPI
0900 EU Jun Flash Estimate euro area inflation
0900 EU May Unemployment
1000 ITA May PPI
1145 US 06/27 The Retail Economist/Goldman Sachs Weekly Chain Store Sales Index
1230 US Q1 U.S. International Investment Position
1230 US Annual U.S. International Investment Position
1230 CAN Apr GDP
1230 CAN Jun Preliminary estimates of principal field crop areas
1255 US 06/27 Johnson Redbook Retail Sales Index
1300 US Apr S&P / Case-Shiller Home Price Index
1345 US Jun ISM-Chicago Business Survey - Chicago PMI
1400 US Jun Consumer Confidence Index
1700 US Jun Dow Jones Economic Sentiment Indicator
2030 US 06/26 API Weekly Statistical Bulletin
2200 US Federal Reserve Bank of St. Louis President James Bullard speaks at the Emerging Venture Leaders Summit
2301 UK Jun CBI Growth Indicator Survey
2350 JPN Q2 Tankan Survey of Enterprises in Japan
(END) Dow Jones Newswires
June 29, 2015 17:38 ET (21:38 GMT)
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