A messy week ahead for share markets – Greece’s financial woes and the rising volatility in China will override other news and send investors off on a hunt for some safe havens.
Chinese markets stood out with a massive trillion dollar, or 13.3% plunge last week.
Worries about Greece weighed on European shares (falling 1.3%). Japanese shares (down 1.1%) also fell on signs of confusion among policymakers on the economy.
US shares edged up 0.8% and were helped by good economic news and a benign Fed, and Australian shares added 0.9% as local investors ignored what was happening in China.
The $US fell on expectations that Fed rate hikes will be gradual and this saw the $A rise slightly despite soft commodity prices – there was little sign of any concern about the problems in Greece.
In fact the Greek standoff continues, but it is threatening the solvency of the country’s banks, which could trigger a collapse this week.
And while the lack of progress in negotiations and the negative rhetoric from the Greek Government is worrying some investors, the fears are nowhere near as deeply felt as in 2009 – 2013 when every twist and turn with Greece and other weak eurozone economies sent markets into a tizz.
Greece is on a path of default and the risks of an exit from the Euro have clearly risen. But the AMP’s chief economist Dr Shane Oliver says there are several points worth noting:
"First, there is still a way to go yet. While a €1.5bn payment to the IMF is due June 30, an actual default will not come till the IMF writes a letter informing Greece it’s in default and this may not come till some time into July.
“Also if a late agreement is reached the IMF, ECB and EU may simply agree to delay payment until any necessary parliamentary votes and referendums occur,” he wrote at the weekend.
The next event to watch is an emergency Eurozone leaders meeting in Brussels tonight our time which will have little impact on the situation unless there is a dramatic change of heart by both sides or Greece.
In the US the Dow fell 101.56 points or 0.56% to end the week at 18,014.28, the S&P 500 lost 11.48 points or 0.54% to close at 2,109.76 and the Nasdaq Composite dropped 15.95 points or 0.3% to 5,117.00.
Locally, the week’s gains came courtesy of the big trading day on Friday.
The All Ords was up 1.2% for the day and 0.7% for the week to finish at 5591.5 while the ASX200 rose 1.3% for the day and 0.9% over the week to finish at 5597.0.
The overnight share price futures market had our market starting with a small loss this morning – that’s irrelevant – what happens in China and Greece will be of bigger concern as the day goes on.
And local investors will be confronted by a 7% fall in world iron ore prices last week. At the end of the Friday night’s trading session, the iron ore price in China was down 0.3% to $US60.70 a tonne. The fall for the week was 7.1%.
