Sentiments in the financial markets continued to be volatile. The NYSE had the biggest trading halt in two years overnight due to a computer glitch. DJIA ended the day down -261.49 pts, or -1.47% to close at 17515.42, above this week's low of 17465.68. S&P 500 also lost -34.66 pts, or -1.67%, at 2046.68 and held above this week's low of 2044.02. Nikkei follows and is down -260 pts, or -1.3% for the moment after hitting a three month low. Nonetheless, the China market recovers on fresh rescue measures from the government in response to the stock market crash. Hong Kong market also stages a strong rebound. The new measures include banning big shareholders in China from cutting stakes for the next six months. In the currency markets, yen surged sharply yesterday on risk aversion but is retreating mildly today.
The FOMC minutes for the June meeting delivered a dovish message, echoing Chair Janet Yellen's comments in the press conference last month and dampening speculations of a Fed funds rate hike in September. The members generally agreed that the economy was improving, in a right track towards the normalization of the monetary policy. However, many of them believed the conditions for a rate hike had not yet been achieved. Meanwhile, they were concerned about a spillover of the Greek problem to the US. Yet, there was no detailed discussion about the Greek problem in the meeting. More in Dovish June Minutes Signaled Fed Members' Concerns over Premature Rate Hike.
In Eurozone, Greece requested a new three year bailout from Eurozone creditors and pledged economic reforms that will be implemented as soon as next week. A detailed proposal will be submitted within days for review and approval at another crisis summit this Sunday. Greek prime minister Alexis Tsipras said that there is no chance by to request for a way out of the "impasse". He noted that "we are determined not to have a clash with Europe but to tackle head-on the establishment in our own country and to change the mindset which will take us and the euro zone down." German finance minister Wolfgang Schaeuble said that "the actual examination can only begin once the full package has been put on the table." IMF chief Christine Lagarde reiterated that restructuring is needed for Greek debts and "Greece is in a situation of acute crisis, which needs to be addressed seriously and promptly."
Australian dollar recovers following stocks and also lifted mildly by employment data. The job market rose 7.3k in June versus expectation of 0.1k. The encouraging part is that full time job rose 24.5k while part time jobs dropped -17.2k. Participation rate also rose to 64.8%, up from 64.7%. Unemployment rate, thus rose slightly to 6.0%, from revised 5.9%. Elsewhere, UK RICS house price balance rose to 40 in June. Japan machine orders rose 0.6% mom in May. China CPI rose to 1.4% yoy in June while PPI dropped to -4.8% yoy.
BoE policy decision will be a major focus ahead. While strong wage pressure might raise hope of higher inflation, the BOE in July would most likely leave the Bank rate unchanged at 0.5% and the asset purchase program at 375B pound. With inflation staying close to 0%, increased uncertainty in the impacts of Greece on European economic outlook, and softer speculations of Fed funds rate hike in September, policymakers would prefer to stand on the sideline this month. Meanwhile, the members would also need to digest the Budget report would be due the day before the meeting. We expect the central bank would maintain the status quo throughout the year. More in BOE To Stand On Side In July, Despite Rising Wage Pressure.
German trade balance, Canada housing starts and new housing price index and US jobless claims will also be released.