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Markets retreat as Greek debt talks stall - 25.6.2015

US stocks fell on Wednesday as Greek debt negotiations stumbled. The S&P 500 fell 0.7%. All 10 sectors ended lower, with materials leading losses. The dollar retreated, with the ICE US Dollar index falling 0.1% to 95.32. 10 year Treasury yields fell 3 basis points to 2.38% as investors sought the safety of government bonds. The revised estimates of first quarter GDP indicated US economy contracted at an annual rate of 0.2 % in January to March, a smaller decline than the 0.7% fall estimated a month ago. The upward revision was the result of higher estimates of consumer spending and lower drop in exports. Monsanto fell 5.7% to $106.32 after the seed company said it would still pursue an acquisition of Swiss rival Syngenta. General Motors fell 3.1% after Goldman Sachs cut the car maker to neutral from buy while it upgraded Ford Motor to buy from neutral. Ford shares climbed 1.4%. The trading volume was 5.5 billion shares on US exchanges, about 10% below the monthly average. Today at 14:30 CET Initial Jobless Claims and Continuing Claims will be released in US. At the same time May Personal Income and Personal Spending will be released. The tentative outlook is positive. At 14:00 CET FOMC member Tarullo will speak on economy and regulation in New York. And at 15:45 CET advance Services and Composite PMIs for June will be released by Markit. The tentative outlook is positive.

European stocks ended lower on Wednesday as creditors rejected Greek reform proposals. The Stoxx Europe 600 fell 0.4%, Germany’s DAX 30 fell 0.6% and Greece’s Athex lost 1.8%. The euro strengthened despite the failure to reach an agreement on Greek bailout extension, and yields on German bunds fell. Among the main issues in debt negotiations are Greek demands for debt restructuring and creditors’ demands to reform Greece's costly pensions system. Several euro zone ministers rejected Athens’ debt restructuring demand and German Chancellor Angela Merkel has ruled out any debt write-off. Greece proposed to impose a 6% value added tax (VAT) on medicine and books, 13% for energy and basic foods, and 23% for everything else, as well as raise taxes on businesses and the wealthy, and raise contributions to pensions to meet budget targets. The International Monetary Fund insists on more savings to be achieved through budget cuts as IMF head Christine Lagarde said a program cannot be built on a premise of improved tax collection which has been promised the past five years with very little result. Greek negotiators rejected creditors proposal presented Wednesday morning, talks will resume today. EU summit of European leaders is scheduled later in the day. Today at 12:00 CET June Retail Sales will be released in UK by the Confederation of British Industries. The tentative outlook is negative for the Pound.

Nikkei ended 0.4% lower today after Greek debt negotiations failed to make a progress but investor sentiment was underpinned by hopes the Trans-Pacific Partnership pact will benefit Japanese businesses as US senate passed the fast track bill. Tomorrow at 0:30 CET May Consumer Price Index, Unemployment Rate and Household Spending will be released in Japan.

Oil prices are steady today after closing higher on Wednesday on expectations of eighth weekly drop in US crude inventory. The EIA report yesterday indicated a higher-than-expected drop in crude inventories while gasoline inventories rose unexpectedly.

Gold prices fell for a fourth session in a row as investors assessed the higher likelihood of September rate hike after revised US GDP data indicated a smaller decline in the first quarter than previously thought.

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