Investors stay level-headed despite Greece

Sentiment:

Concerns over Greece's situation continued to be the focus of financial markets; however, investors appeared quite relaxed given the risks.

Markets of most asset classes had muted reaction to the Greek "no" vote on the weekend.

European leaders have said that they remain open for discussion, but other comments from leaders have indicated that Greece still needs to accept the deep reforms if it wants to remain in the euro. 

Tsipras has said that Greece would bring a proposal to an emergency summit on Tuesday.

The European Central Bank (ECB) kept its support to Greek banks unchanged through its Emergency Liquidity Assistance (ELA).

Additionally, the ECB is demanding more collateral for the same amount of funding.

The measures stop short of withdrawing support all together, but Greek banks could still run out of cash soon. The Greek government has said banks will remain shut over Tuesday and Wednesday. 

Share Markets:

Share markets weakened as expected. European shares fell, with the Euro Stoxx down 2.2%. In the US, losses were limited as shares partially rebounded later in the session.

The Dow fell just 0.3% and the S&P500 fell 0.4%.

After dropping over 28% from its peak in recent weeks, Chinese stock markets rebounded in volatile trade yesterday, gaining 2.4%.

The market was boosted by moves by authorities, in which brokerages and fund managers would buy stocks helped through state-backed funds and IPOs suspended.

Interest Rates: 

US treasuries rose as the events in Greece supported demand for its relative safety. The 10-year yield fell 10 basis points to 2.29%.

In Europe, German yields were down marginally - 10-year yields fell 3 basis points. However, Italian Spanish and Portuguese bond yields all rose sharply. The yield on 10-year bonds rose 14bps, 16bps and 24 bps, respectively.

Yields on Australian bond futures were relatively little changed after dropping significantly yesterday. The 10-year yield fell 2 basis points to 2.96% while 3 year bonds were unchanged at 1.97%.

Foreign Exchange:

Like in equities, there was a muted reaction in currency markets. The euro edged slightly higher from its lows but most major currencies were little changed.

The Australian dollar also edged a touch higher to trade at around 75 US cents this morning.

Commodities:

Prices most commodities, including copper and oil fell sharply as Greece's concerns weighed on sentiment.

Measures in China to prevent the slide in share markets also weighed on prices. Gold was the exception, supported by safe-haven buying.

Australia:

ANZ job ads rose 1.3% in June, after rising by an upwardly revised 0.1% in May (previously reported as no change).

This was the third consecutive monthly increase in job ads. For the year to June, ANZ job ads are up 10.8%, down from 14.1% in the year to May.

TD-MI inflation rose 0.1% in June, after increasing 0.3% in May. For the year to June, inflation is up 1.5%, a slight lift from the 1.4% increase in the year to May.

The underlying measure of inflation rose 0.1% for a 1.4% annual rate, below the RBA's 2-3% inflation target band, highlighting that inflation remains contained.

Europe:

Sentix investor confidence rose from 17.1 in June to 18.5 in July, in spite Greece's debt concerns.

The survey however, was taken before the referendum on the weekend.

German factory orders slipped 0.2% in May, better than the market estimate of -0.4%. 

Recent data have pointed to an improvement in German manufacturing, but it remains to be seen how Greece will impact on sentiment and demand.

United States:

The ISM services index rose from 55.7 in May to 56.0 in June, but was below a consensus estimate of 56.4. In contrast, the Markit Services PMI fell in June from 56.2 to 54.8.

These add to the mixed message about the pace of expansion in the US economy. Nonetheless, both measures remain comfortably above 50. 


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