European markets brace for Grexit

There are a number of notable economic releases that may capture attention today on Tuesday June 16th in Europe. However, the Greek debt saga intensified yesterday and continues to drive markets today.

European stocks crashed to four-month lows, the main Greek ATG index shed more than 1.5 per cent today and five per cent yesterday, and bond yields on Greek government debt have spiked higher.

Yields on Greek two-year bonds soared to over 30 per cent, while on ten-year bonds yields surpassed 13 per cent. 

Yesterday, officials of Europe and Greece announced that it was now up to the other side to reach a deal. An atmosphere that is adding to uncertainty over the fate of Greece in the eurozone. 

“Signs of progress are few and far between, leaving the markets to continue the negative performance that has been a regular feature of trading in the past month,” said Connor Campbell, financial analyst at Spreadex.

“Each side is firmly entrenched in their belief that their proposal is the only feasible option.” 

The Greek debt saga continues to weigh on market sentiment in Europe, and has even impacted the major economies of the region. 

Today, the German ZEW research institute released its forward-looking Economic Conditions index, which tumbled to 31.5 from 41.9, a staggering decline. 

Furthermore, ZEW president Professor Clemens Fuest pins the blame squarely on Greece.

“External factors are reducing the scope for further improvement of Germany’s good economic situation,” he said.

“These include, in particular, the ongoing uncertainty over Greece’s future and the restrained dynamic of the global economy.”

Elsewhere, the brief period of falling prices in the UK came to an end. The Office for National Statistics showed as the Consumer Prices Index rose by 0.1 per cent in May when compared with the same time last year. 

After inflation dipped to -0.1 per cent in April, the latest figures are welcome news. But inflationary pressures remain limited, according to Bank of England governor Mark Carney, who expects inflation to remain low for some time yet.