The negative momentum from Friday's sessionpersisted during the London session. Another Spanish region confirmed it needed rescuing, and there are five others expected to follow. A Der Spiegel report that the IMF may cut further lending to Greece gained traction throughout the day. The S&P500 is currently 1.1% lower following a 0.7% rebound in NY. Spanish equities only fell 1.1% thanks to the reinstatement of a short selling ban (Italy also), but Greek equities fell 7.1%. Commodities fell sharply, the CRB index down 1.9%, oil -3.4%, copper -2.1%, and overbought wheat -3.2%. US 10yr treasury yields gapped to a fresh record low at 1.40% before recovering to 1.44%. Eurozone peripheral bonds all suffered losses, the Greek 10yr yield up 199bp, Spain's up 30bp to a decade high of 7.57%, and Italy up 26bp to 6.43%.
The US dollar index (DXY) gapped to a fresh two year high. EUR conversely made a fresh two year low of 1.2067 before rebound from midday London to 1.2145. USD/ JPY bounced from early London's 0.7794 to 0.7846. AUD followed the global theme, extending domestic session losses from 1.0320 to 1.0244 before rebounding in NY to 1.0285. AUD/NZD continued its month-long rally to reach 1.3030 where major resistance can be expected
Economic wrap
US Chicago Fed national activity index rose from -0.48 to -0.15 in June. This 'survey of surveys' indicates that the overall tone of June economic activity data was not as weak as it was back in May.
Euroland consumer confidence drops from -19.8 to -21.6 in July, its steepest fall since last year and its lowest level since the recession of 2008-2009.
Spanish 10 yr bond yields hit 7.5%, equities down 10% in two days. On top of Friday's developments, another five Spanish regional administrations may be seeking bailouts from the national government, further undermining investor confidence in the sovereign. Meanwhile government officials continue to urge the European Central Bank to use its firepower to support the bond market, to no avail so far. The ECB's SMP has not been active for some months now but when used late last year Spanish (and Italian) bond yields fell back from around 7% to the 5-6% range. Later in the session Spain (and Italy) reinstated short selling bans and intraday losses of up to 5% were pared back to 1%. But the earlier price action was indicative of increasing doubts about sovereign solvency, European leadership, policy-maker courage and indeed the framework of the euro itself. Separately, the Greek PM Samaras described the situation in Greece as equivalent to the great depression in the US in the early 1930s. Greece wants an extra 2 years to meet her budget commitments and more bailout assistance (maybe €40-60bn on top of the €240bn already committed); the IMF was reportedly considering holding back on its next bailout tranche, which would see Greece insolvent by August and in default by September, were no other benefactor to step up to the plate. However the IMF issued a denial of sorts, saying it was working with Greek authorities to bring the budget program back on track.
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