We finished last week on a downbeat note, with scant hopes of any change in Greece’s seemingly inexorable slide into a default, but the situation on Monday stands in stark contrast.
By Peter Martin
Monday, June 22, 2015
Hopes of a last-minute deal have emerged, boosting risk appetite substantially.
European leaders are holding an emergency meeting to consider new proposals from Greek Prime Minister Alexis Tsipras and while Eurogroup President Jeroen Djisselboem said it was too early to make a final assessment of the proposals, the financial markets have responded very positively, perhaps viewing the proposals as a sign that the Greek government is ready to make the necessary concessions.
The German DAX rose 279 points or 2.53% to 11,319 and the CAC 40 jumped 116 points or 2.41% to 4931.4. The large gains were not just restricted to indices from continental Europe though. The FTSE 100 gained more than 1% and US stocks also opened strongly. The Dow Jones was up 116 points or 0.64% shortly after the opening in New York, while the broader measure of the S&P 500 Index also gained 0.64%, climbing to 2123.7.
The Chicago Fed said today that it gauged a slight pickup in economic activity last month: the Chicago Fed National Activity Index (CFNAI) rose to -0.17 in May from April’s reading of -0.19, while the three-month moving average improved to -0.16 from -0.20 in April (the CFNAI is a weighted average of 85 existing monthly indicators of economic activity, formulated to have an average value of zero). May’s negative reading suggest economic activity remained below the historical trend and the Chicago Fed said the data ‘suggests subdued inflationary pressure from economic activity over the coming year.’
After struggling in the first few months of the year, housing has been a bright spot for the US economy of late and we can look forward to quite a few indicators being released for this area this week. As well as Monday’s release of existing home sales data for May, we have May’s new home sales figures on Tuesday along with the Federal Housing Finance Agency’s house price index for April.
Other key economic reports released this week include Markit’s flash reading for its manufacturing PMI on Tuesday, the final revision for first-quarter US GDP on Wednesday (the consensus expectation is for an upward revision to -0.2% from the -0.7% reported in the last estimate) and the flash services PMI for June on Thursday.
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