Good morning. I hope you had a good weekend. There is only one story today and its “no”. Greece voted against yielding to further austerity demanded by creditors, leaving Europe’s leaders to determine if the renegade nation can remain in the euro. Sixty-one percent of voters backed Prime Minister Alexis Tsipras’s rejection of further spending cuts and tax increases in an unprecedented referendum that’s also taken the country to the brink of financial collapse. Tsipras described the result as a “great victory”, and said Athens would return to the negotiating table on Monday with a strengthened hand. The result turns the tables on Merkel and Greece’s other creditors, who must now decide if a financial rescue of the region’s most-indebted country is still possible. It significantly raises the chances of a Greek exit from the single currency, as the country’s banks run out of cash and its economy staggers toward all-out collapse.
US & Asia Overnight from Bloomberg
Asian stocks fell, with the regional benchmark index set for its biggest drop in more than a year, after Greece voted to reject further austerity. Chinese shares rallied after a three-week slump.
Asahi Glass Co., which gets about 21 percent of sales from Europe, dropped 2.7 percent in Tokyo. BHP Billiton Ltd., the world’s biggest mining company, slipped 2.1 percent in Sydney as copper futures headed for a second day of declines in London. China Airlines Ltd. gained 2.9 percent in Taipei after regulators increased flights to mainland China.
The MSCI Asia Pacific Index slid 2.1 percent to 143.35 as of 12:16 p.m. in Hong Kong, heading for the biggest decline since February 2014. Sixty-one percent of voters backed Prime Minister Alexis Tsipras’s rejection of further spending cuts and tax increases in an unprecedented referendum that’s also taken the country to the brink of financial collapse. The results mean Greece exiting the currency union is now the base scenario, JPMorgan Chase & Co. said. Japan’s Topix index sank 2 percent as the yen gained 1 percent against the euro.
European Union President Donald Tusk called a euro-area summit for Tuesday. While the European Central Bank’s Governing Council is due to talk on Monday on whether to keep supporting Greece’s lenders, it’ll probably be reluctant to preempt such a meeting.
“There’s a whole range of unpredictable outcomes,” Mark Lister, head of private wealth research at Craigs Investment Partners Ltd. in Wellington, which manages about $7.2 billion, said by phone. “It’s surprising that the ‘no’ vote won so convincingly, certainly more decisively than the polls had suggested. This puts us in limbo for so much longer, and it’s very negative for risk sentiment especially when you add in what we’re seeing with developments out of China.”
China Measures
The Shanghai Composite Index gained 2.2 percent after China suspended initial public offerings and brokerages pledged to buy shares in weekend measures aimed at halting the market rout. Mainland shares have erased $3.2 trillion of value after posting their biggest three-week slump since 1992 on concern leveraged traders are liquidating bets after valuations exceeded levels seen during China’s stock-market bubble of 2007.
Australia’s S&P/ASX 200 Index dropped 1.3 percent. South Korea’s Kospi index sank 1.8 percent. Taiwan’s Taiex slid 0.8 percent and New Zealand’s NZX 50 Index slipped 1 percent. Singapore’s Straits Times Index fell 0.8 percent, while Hong Kong’s Hang Seng Index tumbled 3.2 percent.
West Texas Intermediate crude dropped as much as 4.4 percent to as low as $54.44 a barrel, headed for its lowest close in almost three months. [Ref]
FTSE Outlook
Well yet again we open Monday morning significantly gapped down from Fridays close, a top left at 6593 this time. We didn’t close the previous gap last week though at 6757. We are not far off the bottom of the Bianca 10 day channel for support at 6413 though today and a level that could well be worth a very brave long! The US is back today after having Friday off so will be interesting to see how much notice they take of the Greece news. They don’t usually like to miss too much of a fall so we could get a bounce this afternoon, pulled up by them. With such a large gap down most technical levels become pretty irrelevant, but the daily pivot is at 6601 for resistance if it were to add 150 points today. Doubtful though! While writing this the Greek Finance minister has just resigned. Probably forced out so that a deal can be done and talks advanced.
In light of that I think it helps the bulls actually, and the market has just risen 15 as that news broke. Its going to be a fast moving day i think as stories break. Generally, though we have a bit more clarity now having had the referendum, so just sort out the money side now or leave the Euro. The 10min chart is the one I have used for the arrows today as there is a fairly decent channel in play initially, with the bottom coinciding with a fib pivot at 6449. All moving averages across the board are bearish though to start so maybe a bit of a dead cat bounce similar to last Monday.