Trading Journal

Expecting high GDP 😁

Investor fears does not relate to the relevance of Greece itself but with the impact of a hypothetical failure could have on financial markets. This scenario would be a negative factor in the global environment, characterized by the slowdown of the Chinese economy and the contraction of many emerging economies. Thus, the dependence of the US economy from domestic factors would increase.

Now, creditors expect Greece to present a new plan so that the technicians from both sides can discuss it until Saturday lunch time, when it will be held the Eurogroup meeting. Chancellor Angela Merkel was adamant in saying that an agreement should be reached by Sunday before the opening of financial markets on Monday.

The Greek Government stated that banks today would not open and would be imposed controls on withdrawals (maximum € 60 daily) and movement of capital, also deciding the closing of the Athens stock exchange presumably to the referendum in Sunday.

US markets closed with very wide losses. The reaction of US investors was significant. Until yesterday, and as at similar times in the past, the US stock markets have always considered the Greek situation a European issue with limited potential to affect the US economy. However, given the high uncertainty that is spreading throughout the Eurozone, US investors fear that the modest European economic recovery is compromised, adversely influencing this quarter the attempted acceleration of the US economy. In a risk aversion context, the publication of economic data has been relegated to a lower plane. Technically, yesterday’s session is an important warning. Since late March, the S & P had fluctuated between 2067 and 2135, not showing any clear trend in the short term. Yesterday, the S & P broke the lower part of this range and may signal the beginning of a descending phase. This signal can be thwarted if the S & P back to close within that range.

Angela Merkel said that should not be discussed new proposals while the Greek people do not express themselves through the referendum.

Another particular moment of increased volatility in the financial markets:
On Sunday 5th July 2015 Greece will be requested to vote in a referendum about the approval or refusal of the austerity measures requested by the EU. This can significantly impact the markets when they open on Sunday July 5th and Monday July 6th.

If there are no unexpected developments for Greece and considering the Wall Street holiday, today’s session should be less volatile than the last one.

The voting yesterday generates great uncertainty. All this uncertainty may generate some nervousness in financial markets, because uncertainty is the worst enemy of investors. The next key date will be July 20, when Greece will have to repay 3500 M. € to the ECB. If this reimbursement is not hypothetically performed, most likely it will be decreed a failure of Greece.

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.

Asian markets closed with sharp losses, justified by the uncertainty in the eurozone and the weakness of Chinese stock markets. In Shanghai, at 7:20 AM, the local stock market lost 6%, with many private investors being forced to sell, as they could not provide financial guarantee to maintain their investment positions in the stock exchange. Chinese officials already mentioned there is “a sense of panic” in the market, which explains the irrationality of sales spiral.

The next 96 hours will be a “time trial”. According to a poll conducted by Reuters, 55% of economists believe that Greece will leave the Eurozone, 60% of respondents believe that Greece can not repay the ECB on the 20th (when matures the loan of 3500 M.€). Most believe that in the case of Greece leave the Eurozone, the ECB will intensify the purchase of European sovereign debt.

The European indices opened with strong gains. Contributing to this scenario was the sharp appreciation of the Shanghai Stock Exchange, which for now, dissipate fears about the instability of this market, but most important was the delivery by Greece of a number of proposals that seem more credible and likely to be accepted by creditors, in exchange for a support program of 53500 M€, for a period of three years.

At the end of the longest summit of European history, the leaders of the eurozone countries arrived this morning to a principle of understanding, and promised to be available to provide more loans to Greece. This will be done immediately to restore normalcy to the banks, but also for the next three years, so that Athens can pay its debts and finance a new recapitalization of its banks, hoping that in this period, reform its economy and put the public finances in a sustainable track.

US markets closed higher, mirroring the positive reaction of European markets to the solution found to Greece. In the coming days, investors will follow the publication of results by several US companies, including some of the top banks such as JP Morgan, Wells Fargo, Bank of America, Citigroup, among others. In addition to these banks, General Electric, a symbol of American business world. For this quarter, analysts estimate a decline in EPS (earnings per share) of companies in the S & P500 between 4% and 4.40%. This is the first quarter since 2012 in which analysts anticipate a bending of corporate profits. Revenues will also register a decline of 4.20%. These predictions are negatively conditioned by estimates of a drop of 57% of the oil companies profits and 38% of its revenues.

In the 2nd quarter, China’s GDP grew by 7%, slightly higher than the 6.90% estimated and in line with the objective of the Government’s growth. Industrial production increased 6.80% (vs 6% est.) in June and retail sales 10.60% (vs. 10.62 est.). The Department of Chinese Statistics said that these calculations were not “inflated, defending their position from the skepticism of some Western economists.

Last night, the Greek Parliament approved with comfortable majority (229 votes) some measures from the agreement sealed on Monday. The dissenting votes (64) came from the Golden Dawn party (Far-right), some members of the coalition party (Independent Greeks), and several members of Syriza (among those 32, who opposed, the President of Parliament) beyond 6 abstentions also from Members of this party. This malaise within Tsipras’ party was already evident by the fact that half of the members of the Central Committee of the Syriza have signed a motion condemning the agreement. Next Wednesday the Parliament of Athens will vote other measures provided by the recent agreement. If the fractured Syriza is not remedied it may rise questions regarding the stability of the Government. Now, the agreement will have to be voted in some countries such as Germany, Slovakia, Finland, the Netherlands and the Baltic countries. In the immediate, the European Commission proposed to grant a short-term loan to Greece of € 7,000 M. to meet repayments ahead especially the ECB. Today’s ECB meeting will be marked by the aftermath of the Greek Parliament vote. The ECB’s communication in relation to other topics should be quite similar compared to previous meetings. At the press conference, the Greek issue should be the focus of journalists. The possibility of increasing the line of liquidity to Greek banks, thus allowing the possibility of the ECB Treasury Greek issue short-term debt should also be questioned.

It was a pretty profitable Week!
The forum is a great help.
Which you all a nice weekend.

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