Many assumed negotiations would go to the last minute and then a “stick save” would appear this weekend between Greece and its creditors – as has been the pattern for years globally since Lehman Brothers was allowed to fail. Talks fell through Saturday and markets misbehaved in reaction Monday. That said there is still time for a kick save – it is just going to have to be after the Greeks vote next weekend on whether they will accept the conditions. Unfortunately that means another week of Greek theatrics. Bill Witherell, Cumberland’s chief global economist, opined “the most likely outcome will be a last-minute deal, unsatisfactory for both sides, that again kicks the can down the road, avoiding ‘Grexit’. That said, the possibility of a truly dire end to this Greek tragedy has significantly increased.” Indexes opened down and took another leg down in the afternoon. The S&P 500 fell 2.09% and the NASDAQ 2.40% as both indexes closed at lows of the day.
Greek Prime Minister Alexis Tsipras called a referendum for July 5, in which Greeks will vote on whether to accept the austerity rescue package previously offered by Athens’ creditors. Stocks extended losses in late-afternoon trade as Tsipras said the stronger the rejection of the creditor deal, the stronger the Greek hand in the talks. He added that the aim for the referendum is to bring continuation of negotiations with lenders. S&P downgraded Greece to “CCC-” and said in a Reuters report that the probability of the country exiting the euro zone is now about 50 percent.
Greece’s banks and main stock exchange were closed Monday and were expected to remain closed for the week to prevent a run on financial institutions. The central bank also recommended a 60 euro ($66) limit on withdrawals from cash machines. An official later said the banks would reopen on Thursday.
Also quietly making news was Puerto Rico, as its governor said the commonwealth cannot pay its debt of about $72 billion.Continue reading