Markets are trading lower as we enter another week on the same old story: fears of contagion and uncertainty surrounding Greece’s future in the Euro. Equities and commodities are trading lower while the USD is gaining strength and US Treasury futures have risen to an all-time high.
Greece Nearly Tapped Out
Cash management troubles in Greece are accelerating according to insider reports – Greece is due to make a bond payment of €430MM tomorrow; however, should payment be made, the country’s cash position will reportedly fall to below €1 billion. With economic growth falling, Greece faces major challenges ahead as tax revenue will continue to fall. The Euro is nearly one-cent weaker against the USD overnight.
The leading Greek political parties remain deadlocked leading onto another week after they could not reach a unity government. The Syriza party refuses to form a coalition if the current austerity program will not be wiped away, something the other two parties are unwilling to do. The Greek stock exchange has fallen another 5% and is trading at a 20-year low as a result of ongoing debt problems.
The People’s Bank of China has cut its reserve ratio requirement (RRR) by 50 basis points as inflation fears are easing. The lower RRR will allow banks to hold less capital and lend more out; the PBoC projects an injection of $63bln into the Chinese capital markets.
TSX futures are off 0.9% while the Dow index is down 0.7% over the weekend. The TSX is led lower by a drop in commodities; Crude Oil has fallen 2% to 94.20/bbl and the US dollar has risen by 30 bps against the loonie. Even Gold could not escape the selloff, falling 1.5% to $1,560/oz.