Morning Moneybeat: Risk Aversion in Play as Greek Drama Intensifies

        By Kristen Scholer
        Morning MoneyBeat is the Journal's pre-market primer packed with market updates, insights and must-read news links. To receive this morning newsletter via email, click here: http://on.wsj.com/MoneyBeatUSSignup
        MARKET SNAP: At 06:05 a.m. ET, S&P 500 futures down 1.01%. Treasury yield lower at 2.34%. Nymex down 2.26% to $58.28; gold 0.22% higher at $1175.80. In Europe, FTSE 100 down 1.63%, DAX down 3.42% and CAC down 3.53%. In Asia, Nikkei 225 down 2.88% and Hang Seng down 2.61%.
        WATCH FOR: Pending home sales for May at 10:00 ET.
        THE BREAKFAST BRIEFING
        Investors are likely to take some risk off the table in the coming days as Greece's debt drama intensifies.
        The debt-ridden country is poised to miss a payment on Tuesday when a EUR1.55 billion ($1.73 billion) bill comes in from the International Monetary Fund, one of Greece's creditors. That's after the eurozone denied Greece's request for a one-month extension to its bailout program Saturday, leading the country to call a referendum for July 5 on whether to accept austerity measures demanded by the country's lenders in exchange for further aid.
        "Financial markets are no doubt braced for another volatile week, at least initially, characterized by flight to safety and risk aversion," said Jan von Gerich, chief strategist at Nordea Bank AB.
        The U.S. equity markets are set to open sharply lower, as stocks around the world tumbled after a series of moves over the past few days, including a shutdown of Greece's banking system, pushed the country closer to an exit from the eurozone. The euro tumbled to more than a three-week low against the U.S. dollar during Asian trading before recovering slightly, while German bonds, widely considered a safe haven, surged as investors scrambled for safe harbors.
        Investors have been confronted with the prospects of a Greek default on and off for much of the past few years. This week's new problems will test investor sentiment as to how insulated the rest of the world is to Greece's problems though.
        "To the extent that there are impacts on the euro-area economy or on global financial markets, there would undoubtedly be spillovers to the United States that would affect our outlook," Federal Reserve Chair Janet Yellen said on June 17.
        With the indebted country on track to run out of money five days before its referendum, markets could witness some turbulence as investors question what's next.
        "Monday is going to be a volatile day," said Mike Ryan, chief investment strategist at UBS Wealth Management Americas. He thinks volatility in Europe will spill over into U.S. stocks. But he doesn't anticipate it will have a severe impact.
        U.S. stocks have remained fairly resilient to Greece's debt debacle since concerns started ramping up mid-June. The S&P 500 finished last week down 0.4% and sits just 1.4% from its record.
        Still, Greece's looming debt payment and failure over the weekend to extend its financial lifeline introduce more uncertainty surrounding the country's future in the eurozone and the possible contagion that could ensue should Greece be forced out of the currency bloc.
        With the country set to default on a payment Tuesday, investors are likely to seek safe-haven assets at the expense of risky trades.
        Morning MoneyBeat Daily Factoid: On this day 20 years ago, American space shuttle Atlantis docked with Russian space station Mir to create the biggest man-made satellite ever to orbit the earth.
        - By Kristen Scholer
        STOCKS TO WATCH
        It will be a thin week for corporate earnings with only a few stragglers reporting results before the new earnings season picks up again in a couple of weeks.
        In corporate news, General Electric was down 1% in premarket trading after it announced it will sell its U.S., Mexico, Australia and New Zealand fleet businesses for $6.9 billion, with a separate smaller deal in the works to unload its business in Europe.
        MUST READS (LINKS)
        Greek Drama Hits Markets--Live Analysis: After a weekend of Greek drama, European stocks slumped and the euro tumbled. Athens said its banks and stock market would be closed this week and the country's central bank imposed capital controls.
        Five Things to Know About Capital Controls in Greece: Greece has locked down its banking system, as it moves ever-closer to an exit from the euro. Here are five things to know about the capital controls.
        First Red Ink, then Call for Greek Referendum: Greek Prime Minister Alexis Tsipras began leaning toward a risky referendum last week after creditors tore up a set of economic proposals he hoped would unlock rescue funds, people close to him say.
        China Struggles to Balance Volatile Markets: Last week's moves by the PBOC--and the market's response--underline not just investors' dependency on signals from a central bank that often fails to clarify its intentions but also how hard it is for China's leaders to steer credit.
        SNB Intervened to Stabilize Franc: Switzerland's central bank had intervened in the currency markets Sunday night to stabilize the strong franc, which has faced renewed buying triggered by the concerns over a potential Greek exit from the euro.
        Five Questions About the PBOC's Latest Easing Measures: China's central bank over the weekend pulled a surprise move, cutting the benchmark lending and deposit rates and reducing the amount of funds some banks are required to hold in reserve. The last time the People's Bank of China combined reductions in interest rates and reserve requirements in one move was during the 2008 financial crisis. This time, the impetus was a stock-market selloff.
        Oil-Market Bettors Take Money Off Table: Money managers moved out of bets on U.S. crude prices over the past two months as the volatility in the commodity's price has plummeted.
        What to Watch at Ukraine's Debt Talks in Washington -- The Short Answer: Negotiations over the restructuring of Ukraine's debt are set to resume in the week of June 29 to July 3 in Washington, in a trilateral meeting between the country's finance ministry, a committee of the country's bondholders and representatives of the International Monetary Fund.
        Morgan Stanley Weighs New Bond-Trading Push: After years of ratcheting back trading operations in favor of more stable businesses, Morgan Stanley is quietly plotting a comeback, pushing for more fixed-income trading business.
        DOJ Girds for Strict Scrutiny of Any Health-Insurer Mergers: The Justice Department is gearing up for an exacting look at possible mergers among top U.S. health insurers, amid questions inside and outside the department about whether industry consolidation could hurt competition.
        (END) Dow Jones Newswires

        June 29, 2015 06:55 ET (10:55 GMT)

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