Friday, the calm before Monday's storm

US bank holiday Friday is the calm before Monday’s storm. 

London
Source: Bloomberg

Traders have had to face some tough decisions ahead of Friday, assessing the pros and cons of all the options available to them; Wimbledon, golf, cricket or just a long lunch. But with the US enjoying a bank holiday in lieu of Independence Day and a lull in developments in Europe before this weekend’s Greek referendum, this is the calm before Monday’s storm.

It is becoming increasingly difficult for the Greek finance minister Yanis Varoufakis to say something that will surprise market watchers, so his latest comments that he sees a 100% chance of an agreement being reached within 24 hours of the Greek referendum is not so much being viewed as crazy as just par for the course. The IG Greek Referendum binary is still strongly pointing to a ‘yes’ victory, and at 67% suggests that a number of Syriza ministers could well be stepping down next week.

The US is enjoying the start of a long bank holiday weekend as markets are shut on Friday in lieu of Saturday being Independence Day, ensuring that the thin trading volumes seen in global equity markets this week will become even more anaemic.

Chinese equity markets have had staggering levels of volatility this week as the China 300 has swung by an average of 7% in a week. With the People’s Bank of China feeling the need to cut interest rates four times in the last six months, the growing sense of panic has been added to with the news that the PBoC has increased the ease with which traders can utilise the value of their properties to trade equities. While the rest of the world looks to reduce leverage China appears to be moving in the opposite direction.

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