US stocks fell on Monday on Greek default concerns after talks between Athens and its creditors collapsed on Sunday. The dollar retreated Monday afternoon after Greek officials denied reports that the euro-zone has developed a contingency plan to impose capital controls on Greek banks this weekend if no agreement is reached on bailout extension by then. S&P 500 declined 0.5%. The ICE US dollar index fell 0.21% to 94.7770. US treasury yields fell on Greek default fears and weaker- than-expected economic data. US industrial production fell unexpectedly 0.2% in May, missing expectations of a 0.2% increase. The June Empire State manufacturing index also undershoot expectations as it fell to minus 2.0 from 3.1 in May. Today starts the Federal Reserve’s two-day policy setting meeting. Market participants are looking ahead to the Federal Reserve policy statement and the chart of policy makers’ interest rate forecast, the dot plot, which will be released tomorrow. Today at 13:30 CET May Housing Starts and Building Permits will be released in US. The tentative outlook is negative for the dollar.
European stocks fell on Monday after European officials on Sunday rejected Greek government’s reform proposals as vague and repetitive. The two sides will continue the talks during Thursday’s meeting of euro-zone finance ministers. Greece is running out of cash as it has to repay 1.6 billion euros to the International Monetary Fund on June 30 while the 245 billion euro bailout expires the same day. European Central Bank President Mario Draghi said the ECB will continue providing liquidity to the country’s banking sector as long as Greek banks are solvent and have sufficient collateral, but the decision to extend the bailout is political and lies with euro-zone national governments, not central bankers. Euro traded higher on Monday after recovering from early losses. The Stoxx Europe 600 index lost 1.2%. Greece’s Athex Composite Index plunged 5%, while Germany’s DAX 30 index fell 1.5%. Today at 10:00 CET June ZEW survey results for Germany and euro-zone will come out. At 9:30 CET inflation data will be released in UK. The tentative outlook is positive for the Pound.
Nikkei fell 0.6% today in thin trading as the possibility of Greek default weighed on market sentiment and investors awaited the outcome of the Federal Reserve’s policy meeting for clues about the pace of US interest rate increases. Bank of Japan Governor Haruhiko Kuroda said today he was not making any assessment on nominal yen levels or predicting its future moves when he described the yen as being very weak last week. He said as long as exchange rates move stably in a way reflecting economic fundamentals, they won't do any harm to the economy. Tomorrow 00:50 CET May Merchandise Trade Balance will be released in Japan. The tentative outlook is positive.
Oil prices fell on Monday as supply glut worries persisted while Baker Hughes oil services company reported on Friday a 27th straight weekly decline in the number of US rigs actively drilling for oil. Data from the US Commodity Futures Trading Commission showed that money managers were net sellers of 19,729 contracts of WTI crude oil in the week ended June 9 as speculative investors continued to exit the oil market.
Natural gas prices jumped on Monday as warmer weather in much of the US raised cooling power demand for natural gas.