Asian shares followed European bourses higher today with Japan’s Nikkei 225 index touching 15-year highs on hopes that a Greek deal will be reached this week. Monday’s Eurogroup meeting ended without a major breakthrough but Greece’s latest proposals were said to be comprehensive and enough to form a basis for an agreement. European shares jumped by over 4% yesterday on optimism that a deal will be reached soon.
However, the proposals had come too late in the day and lacked enough detail for an immediate agreement. IMF head Christine Lagarde was quoted as saying “We have a huge amount of work to do in the next 48 hours”. Eurozone finance ministers will meet again on Wednesday to approve the details, which will then be put forward to Eurozone heads of government for final approval on Thursday.
Progress was made after Athens gave some ground on pension and VAT reforms. Although the nominal pension level will not be cut, Athens proposed to end early retirement and raise taxes on businesses and high-earners so as not to have to raise the VAT rate on electricity. It was reported that the German and Irish finance ministers objected for the emergency liquidity for Greek banks to be extended unless capital controls were imposed. But EC President Juncker said that capital controls were not discussed at the Eurozone summit.
The euro slid on Tuesday in Asian session as markets started to get more cautious on how the talks will progress in the next few days. The single currency fell to 1.1250 against the dollar and was also lower against the pound at 0.7129. Dollar strength also contributed to the euro’s weakness as Monday’s strong home sales figures pushed the dollar higher. The greenback rose to 123.68 against the yen in late Asian session. The pound recovered from the day’s low of 1.5763 against the dollar to rise to 1.5792.
In other news, PMI data for Japan and China for June were released this morning. The HSBC manufacturing PMI for China came in above estimates at 49.6, a three-month high, versus 49.4 expected. But the Markit/JMMA manufacturing PMI for Japan was below estimates at 49.9 versus 50.5 expected.
The main data to look out for today are the June flash (preliminary) manufacturing and services PMI for France, Germany and the Eurozone, as well as May’s durable goods orders for the US. New home sales figures for the US are also released later today.
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