All those nice words about a possible Greek deal blew up overnight, sending markets in Europe lower after an early 1% rise, and dropping Wall Street by 1% on the Dow and 0.7% for the S&P 500 and Nasdaq.
The US dollar edged higher, but gold and oil fell. The Aussie dollar was trading at just over 77 US cents, and our market will start with a small loss, but trading will be uncertain with more talks happening as you read this, with more to occur this afternoon.
The only bit of good news for the local market was a small rise in the price of iron ore to $US61.70 a tonne overnight.
The Dow fell 178 points, or 0.98%, to 17,966.07, the S&P 500 lost 15.62 points, or 0.74%, to 2,108.58 and the Nasdaq dropped 37.68 points, or 0.7%, to 5,122.41.
The headline on the Financial Times Story – “Hopes dashed for Greek bailout deal” summed up the way the day’s talks ended after that early promise.
Greek prime minister, Alexis Tsipras, failed to strike a deal after seven hours of talks in Brussels with the IMF, the European Central Bank and EU. The trio are Greece’s main creditors.
And a follow up evening meeting of eurozone finance ministers, finalise a new bailout deal, ended after an hour because there was no agreement to discuss.
The Greek Prime Minister was due to resume talks with the heads of the European Commission, the ECB and the IMF at 11pm (7am Sydney time) in Brussels in an attempt to close the gap between the groups and Greece.
The Financial Times says those differences “remained wide". Eurozone finance ministers have been told to stay in Brussels and reconvene at 1pm on Thursday (that’s 9 pm tonight, Sydney time).
From the tone of the reporting in the FT and Reuters, a breakthrough looks remote and the chances of an agreement before Thursday night’s summit of EU leaders, looks remote at this stage.
Reuters reported that it was told by a euro zone official: “There is less optimism about a deal now than before. The Eurogroup tomorrow may not be the last." The first official said, however, that without a deal by Saturday to allow a vote in the German parliament on Monday, Greece could not get the cash to meet a repayment deadline on Tuesday which may place it in default.”
“Among key unresolved disputes were Greek demands for debt restructuring, which several euro zone ministers rejected, and differences over reforming Greece’s costly pensions system,” Reuters said.
German Finance Minister Wolfgang Schaeuble, whose country is the biggest creditor, reportedly said preparations for a cash-for-reform agreement had barely advanced. His Austrian colleague was among several to say Greek demands for debt relief were a problem.
A Greek official said the creditors’ counter-proposals, handed to Athens on Wednesday morning and rapidly leaked on the Internet, were not acceptable as they stood, but Tsipras hoped for an agreement late on Wednesday or on Thursday when all 28 EU leaders arrive for a regular two-day summit.
Locally, investors should watch for another fall in the price of IOOF shares today after an explosive speech in the Senate last night by respected National party senator, John Williams.
His speech came only hours after the Senate rejected a motion by the Greens calling on the Federal government to launch a royal commission into misconduct in the financial services sector. Labor voted with the government.
IOOF shares fell 3.8% yesterday to end at $9.12. That was after the small rise on Tuesday and Monday’s big sell off on the original news from Fairfax about the problems at IOOF.
Fairfax Media reported this morning:
"Talk about closing the gate after the horse has bolted," Senator Williams said in his speech on Wednesday night.
"As if Australians haven’t been sickened by the dodgy financial practices of some at the CBA (Commonwealth Bank), Macquarie Private Wealth and NAB (National Australia Bank) we now have very concerning allegations of insider trading, front-running and even cheating on exams."
"With any organisation, particularly one as large as IOOF, one would expect the highest standards, the highest ethics and a reputation beyond reproach," he said.
"Senator Williams named IOOF head of advice research Peter Hilton "as a person who has allegedly engaged in front-running where he conducted trades on at least 53 occasions over 20 years".
"One document relates to an internal investigation into potential front-running by Mr Hilton in 2009. Mr Hilton went on leave this week "until further notice".
This could infect the entire financial services sector after Senator Williams’ speech last night.
