Global Markets, Oil Dip After Greek No Vote

Nichole Harper
06 Jul, 2015
New York City

World markets declined for the second day as crisis in Greece deepened and euro zone leaders set off another round of negotiations ahead of summit tomorrow. The historic Greek no-vote has complicated already chaotic negotiations with no clear path in resolving crisis in Greece.

[R]1:40 PM – World markets looked ahead as crisis in Greece deepened and euro zone leaders set off another round of negotiations ahead of summit tomorrow. The historic Greek no-vote has complicated already chaotic negotiations with Greece with no clear path.[/R]

World markets reacted with a caution to the fast developing crisis in Greece amid growing contagion worries to the smaller economies of the euro zone.

Greece in a referendum on Sunday rejected in a 61% ‘No’ vote bailout terms laid out by international lenders. The historic vote strengthened the hands of Prime Minister Alexis Tsipras with no clear way to end the crisis.

European Central Bank may not be able to provide more liquidity to Greece unless a compromise is struck this week.

Time is of essence as Greek banks are likely to run out of money as early as next week and country may face economic collapse with the halt of import fuel and other commodities. Greece is expected to extend bank closure for the rest of the week

However, leaders in the euro zone sent mixed signal after the historic vote. German Chancellor Angela Merkel and French President Francois Hollande are set to meet this evening.

European Commission Vice President Valdis Dombrovskis said the commission is not able to negotiate a new bailout plan for Greece without a new mandate from the Eurogroup.

Eurogroup, a group of finance ministers in the euro zone, is scheduled to meet tomorrow before the summit with Greek leaders.

Prime Minister Alexis Tsipras appointed new finance minister Euclid Tsakalotos after Yanis Varoufakis offered his resignation.

European lenders may be forced to offer more lenient terms for the next tranche of bailout or may force Greece to leave temporarily the currency union if the struggling nation decides to default.

On Wall Street, Tollbooth Strategy Index fell 16.95 to 10,664.34.

S&P 500 index slid 0.3% or 5.84 to 2,070.94 and the Nasdaq Composite Index decreased 0.3% or 13.94 to 4,995.28.

Crude oil in New York slipped $2.03 to $58.29 a barrel and gold rose $2.70 to $1,166.20 an ounce.

U.S. Movers

Aetna Inc ((AET)) declined 4.5% or $5.62 to $119.87 after the diversified health care company agreed to acquire Humana Inc for cash and stock valued at about $37 billion or approx $230 per Humana share based on the closing price of Aetna common shares on July 2.

Humana stockholders will receive $125 in cash and 0.8375 per shares of Aetna.

The combined company projected operating revenue of fiscal 2015 of about $115 billion.

The transaction is expected to close in the second-half of 2016.

Allergan, Inc fell 31 cents to $307.20 after the Ireland-based pharmaceutical company agreed to acquire medical devices maker Oculeve for $125 million in an all-cash transaction.

The transaction is expected to close in the third quarter.

European Markets

Caution prevailed in trading across the euro zone after 61% voted against the latest tranche of bailout with conditions attached. Euro eased and markets in the euro zone dropped between 0.5% and 2%.

Portugal’s 20 Index slumps 1.5%, while Spain’s IBEX falls 2.1% and Italy’s FTSE MIB gauge loses 2.2%.

In London trading, FTSE 100 index decreased 0.7% or 45.19 to 6,540.62 and in Frankfurt the DAX index dropped 1.5% or 166.31 to 10,890.78.

In Paris, CAC 40 index slumped 1.8% or 84.50 to 4,723.76.

EasyJet Plc fell 0.4% to 1,574 pence after the U.K.-based low-cost airline company said passenger traffic in June climbed 7.6% to 6.6 million from 6.1 million from same month in a year ago.

The airline company said load factor in the month edged up 0.7 percentage point to 92.7% from 92% a year earlier.

For the last twelve months, passenger numbers jumped 5.9% to 67.1 million and load factor grew 1.1 percentage points to 91.2%.

Rolls-Royce Holding Plc plunged 6.7% to 798.90 pence after the U.K.-based aerospace and defense products maker lowered its operating profit forecast between £1.33 billion and £1.48 billion compared to earlier estimated range of £1.40 billion to £1.55 billion.

The company lowered its estimate of underlying profit in the marine segment between break even and £40 million from the previous guidance between £90 million and £120 million.

Asian Markets

Nikkei in Tokyo and market indexes in Asia dropped after Greece rejected terms set by international lenders in a referendum. Finance minister resigned and Greece prepared to negotiate with lenders with leaders in the euro zone sending mixed signals.

Market indexes in Japan dropped more than 2% after Greece rejected terms of bailout and finance minister resigned.

The deepening chaos and growing uncertainty in the euro zone has begun to draw global investor’s attention. The yen perked up and the euro edged down and crude oil prices plunged more than 2%.

The Nikkei 225 Stock Average declined 427.67 or 2.1% to 20,112.12 and the broader Topix index dropped 31.73 or 1.9% to 1,620.36.

The yen closed at 122.65 against a dollar.

Stocks in Mumbai opened sharply lower after Greece rejected conditions attached to bailout by international lenders.

Oil refiners and retailing companies rallied in Mumbai after the oil price decline.

Bharat Petroleum Corp. Ltd rose 3% to Rs.928, Hindustan Petroleum Corp. Ltd gained 2.2% to Rs.789 and Indian Oil Corp. Ltd increased 2.1% to Rs.425.15.

Rupee weakened 3 paisa to 63.41 against one U.S. dollar.

The Sensex Index gained 115.97 or 0.4% to close at 28,208.76. The CNX Nifty increased 37.25 or 0.4% to 8,522.15.

Markets in India ignore the growing uncertainty and confusion in the euro zone after Greece rejected bailout terms in a referendum held on Sunday.

Videocon plans to invest $2.5 billion in oil and gas ventures in Brazil. Kotak Mahindra said foreign investment limit in the bank was increased to 55% from the current 49%.