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.
During this week, European investors will follow the publication of the results of US companies as well as first quarterly accounts that European companies will present. Mining shares may trade under some pressure because of the fall in the price of various metals such as gold, silver and palladium. Banks shares, such as Barclays and Standard Chartered, may negotiate with a larger volume than normal. The English newspapers announced that Barclays will decrease the number of employees, while the Standered Chartered revealed it would announce restructuring measures in order to reduce costs.
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