Ger30, UK100 and SP500 are CFD’s, written over the Dax30, Footsie100 and S&P500 Index futures:
In the pre-opening, European indexes were negotiating slightly higher. This possible initial climb is more a technical reaction to yesterday’s losses than the occurrence of any event or any improvement in investor sentiment. According to the Greek authorities, the Greek banks will not reopen today and will remain closed for a few days. In addition to the limitations on cash withdrawals and control the movement of capital, liquidity of these institutions is alarmingly decreasing in recent days. The ECB is now the only source of liquidity of the Greek banking system. Yesterday, the Central Bank maintained a hotline on 89000 M. €. However, that institution announced that it will adjust the haircut to the collateral (guarantee) that Greek banks have to provide when they are financed by the ECB. The other problem that must be solved or at least achieve some progress is related to the negotiations. Today will be held another meeting of the Eurogroup in the aftermath of the referendum in Greece, and the Greek representative will not participate. The Minister of Finance Varoufakis was replaced by Euclid Tsakalotos, Deputy Minister of Foreign Affairs. Euclid Tsakalotos has a doctorate in economics at Oxford University and is a Syriza member for over 10 years. In May, replaced Yanis Varoufakis leadership of the Greek delegation in negotiations with creditors. Yesterday, the Spanish Finance Minister, Luis de Guindos adopted a conciliatory stance not showing intransigence demonstrated by other European leaders. Luis de Guindos said that Europe is ready to negotiate with Athens the third rescue plan. The Spanish Minister of Finance is pointed as a presidential candidate of the Eurogroup when the mandate of Jeroen Dijsselbloem finish. Later, it will meet the Council of Europe, in an extraordinary way, with major European leaders.
Considering the European situation, US markets closed with fairly contained losses. After a pressed start, equity markets were able to begin a modest recovery. However, this recovery was unbalanced, varying from sector to sector. The uncertainty in the Eurozone and the high volatility of financial markets in China have led to oil prices to sharp losses (-1.30%), which penalized the respective sector. In other sectors, such as biotechnology and social networks, there has been high volatility that has been underlined by automated trading programs, some very short-term. The latest statistics from the New York Stock Exchange, arises an interesting fact: about 45% of the trading volume takes place through these programs. While some are based on mathematical and statistical algorithms, others are limited to placing buy orders and sales that last only milliseconds, trying to benefit from the spread (difference) between the buy and sale. The ISM index for services rose in June from 55.7 to 56.0, falling short of the 56.2 anticipated by economists. The new orders component, whose cycles precede the ISM as a whole increased from 57.9 to 58.3. However, the employment component retreated for the second consecutive month from 55.3 to 52.7, against the latest signs of the labor market.
The Nikkei and some Asian indices ended high. The justification for this increase may be due to the fact that the fall of the main European markets (DAX and Eurostoxx) have not been as significant as feared. Some investors feared the reaction of European markets was identical to Last week’s Monday, when losses amounted to 3%. In China, the Shanghai market continues to show very volatile. In recent days there have been several data showing that many international investors are reducing their exposure. This decision is explained by the differences between the economic reality of the country and stocks prices, as well as the recent measures to support the stock market by the Chinese authorities, something unusual in Western markets.