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Greek default looms large

Published Thursday, June 4th, 2015

With just a day to go before its next IMF loan repayment and a breakthrough in the Greek debt impasse remains as elusive as ever after Alex Tsipras rejected the offer put forward by international lenders following last night’s crunch talks with EU officials. Optimism had built in the run up to the meeting where it was thought that differences were slowly converging and a deal aimed at preventing a messy default would be struck. However, despite the ongoing claims of progress being made, Greece’s future is still tainted in uncertainty as both it and its creditors struggle to compromise over their “red lines”.

Premature hopes of an imminent conclusion to the debt saga had lifted sentiment earlier in the day with European stock markets registering modest gains. The mildly upbeat mood gained further support from solid eurozone retail sales data revealing a 0.7% rebound in April as well as a slight easing of the bloc’s jobless rate to a three-year low of 11.1%. Final Services PMI and ISM readings pointing to a slowdown in service sector activity in Europe and the US were largely shrugged-off as was a downward revision made by the OECD to its 2015 global growth forecast from 3.7% to 3.1%.

Currency and sovereign-debt markets had begun the session on a steadier footing but this proved to be short-lived after investors digested comments from Mario Draghi in which he dismissed concerns of recent government bond volatility and hinted at firmer inflation expectations. 10-year Bund yields duly topped a 2015-high of 0.88% and the euro bounced 1% taking it to more than a 3% gain against the dollar in the last two sessions. Dollar weakness would have been even more pronounced had it not been for solid US trade data pointing to a narrowing of its trade deficit and a private-sector jobs survey revealing a sizeable uptick in hiring last month.

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.