European equity markets have been shaken to the core as Germany votes on Greece’s third bailout, and tensions are high as Athens is just one day away from a debt repayment. It’s the same old story with the eurozone: Germany is balking and Greece is begging, and without the rescue package Athens will be in arrears.
Greece is in a lose-lose situation; should the bailout be granted it will split the Syriza party, but without the package it is facing default. Germany’s patience is wearing thin, and dealing with the Greeks is damaging political harmony in Berlin. And the same theme is playing out across eurozone stock markets.
The Chinese equity markets may have ended on a positive note, but the erratic swings should be viewed with caution, and such a wide trading range tells us that China will not be stable for some time.
Glencore’s shares have dropped to an all-time low after a fall in first-half profits. The company has previously looked to its commodity trading division to offset weakness in its mining assets, but now the dealing desk is under pressure and Glencore’s goose is no longer laying any golden eggs. Glencore, like many investment banks pre-2007, has become overly-dependent on trading income and the downturn is hitting it the hardest.
We are expecting the Dow Jones to open 60 points lower, at 17,450. The volatility in China’s stock market sparked the sell-off in the US index futures, and when you add in political uncertainty in Greece and the Fed minutes tonight, traders are only likely to get more nervous. Greece is the dominant story at the moment, and not even a dovish set of Fed minutes could convince dealers to buy into the falling market.