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PVM Fundamental Report 03 July 2015

Published Friday, July 3rd, 2015

The defiant tone of Greece’s leaders was maintained yesterday despite the first signs of cracks beginning to appear in Alex Tsipras’s ruling coalition government ahead of this weekend referendum. Four members of the minority Independent Greeks party renounced the NO vote claiming that an exit from the eurozone and reintroduction of the drachma was unthinkable. Finance minister Yanis Varoufakis did his best to rally the NO contingent by reiterating his belief that voters will reject creditors’ proposals and claimed he would rather cut his arm off than give in to their demands.

Just as the latest opinion poll showed the YES vote making further headway with those in favour of a bailout deal said to stand at 44.8% and 43.4% against, Alex Tsipras and other NO supporters were given a timely helping hand from the most unlikely of sources. The IMF released its latest assessment of the Greek economy and revealed what to most was plain to see. It warned that the embattled country faces years of instability and would need €50 billion over the next three years just to stay afloat. Its suggestions for helping its economy to recover included an extension of loan maturities and, more pertinently, for a substantial chunk of its national debt to be written-off. The downbeat outlook comes as existing controls were tightened with permitted bank withdrawals reduced by another €10 to €50 as the cash reserves of its banks were seen dwindling to below €500 million.

Although investors have become accustomed and somewhat desensitised to the Greek debt crisis, uncertainty surrounding Sunday’s vote saw global stock markets end the session a touch lower. US markets had the earlier-than-usual release of non-farm payroll data to digest which largely underwhelmed after 223,000 jobs were added in June, slightly less than forecasts of 230,000 and down on May’s 254,000. Although the jobless rate dipped to 5.3% and to within a whisker of what the Fed sees as a natural equilibrium, rate lift off jitters will have eased going into the Independence Day holiday weekend on tepid wage growth figures which were unchanged on the month and only up a paltry 2% compared with June of last year.

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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.