Optimism Builds on Greece Deal as Oil Falls
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Stocks surged in Europe and the United States as rumors floated about an announcement, maybe tomorrow, regarding an agreement over Greece’s debt.
Equities rose as rumors surfaced that the European Commission will announce a compromise between the European Central Bank, the German Bundesbank, and the Greek government. The EC denied the rumors, acknowledging that “intense contacts” continue between the EC President Jean-Claude Juncker and Greek representatives.
Stocks surged in Europe and the United States as rumors floated about an announcement, maybe tomorrow, regarding an agreement over Greece’s debt.
Equities rose as rumors surfaced that the European Commission will announce a compromise between the European Central Bank, the German Bundesbank, and the Greek government. The EC denied the rumors, acknowledging that “intense contacts” continue between the EC President Jean-Claude Juncker and Greek representatives.
Pundits and analysts are doubling-down on the belief that the Greece’s exit from the European Union would be a costly problem for Germany, leading to a domino effect that could have Spain, Portugal, and Italy leave as well. Already, the victory of the Greek party Syriza has emboldened a similar group in Spain, Podemos, who in the past has advocated for an exit from the euro or the European Union. Podemos recently hired whistleblower Herve Falciani, who leaked banking data to expose tax evaders while working for HSBC.
Greece Talks
On Monday, Greek Finance Minister Yanis Varoufakis said his government would not budge on their budget proposal, which would limit EU demands of more cutting to spending. Instead, Varoufakis has proposed a debt restructuring that would tie bond payments to GDP and ensure repayment of German and French bondholders while also allowing the Greek government to expand its social welfare spending.
Varoufakis has said in repeated interviews that the Greek situation is dire. Moreover, former business owners are now sleeping on the streets and many Greeks are going hungry because of austerity measures. On his blog, Varoufakis quotes economist James Galbraith who laments the situation in Greece. “In the streets of Athens you see elderly people prowling through the garbage looking for food. You see lots and lots of people sleeping on the streets, it’s a very depressing sight,” Galbraith said.
Greek shares rose nearly 6% on the news, while 10-year bond yields fell 35 basis points to 10.39%.
Oil and Stocks Decouple
After several weeks of oil and equities falling and rising in tandem, oil fell despite the rise in equities as more attention focused on Greece. The International Energy Agency announced that it expects oil prices to fall as supplies remain at record levels, countering a recent OPEC note that said prices are likely to rise as inventories begin to fall.
WTI crude futures fell to less than $51 per barrel, though they are still above their levels of a month ago. The IEA said, “downward market pressures may not have run their course just yet” adding that OECD stockpiles are likely to rise further, not decline, as a result of continued productivity around the world.
In addition to the IEA report, several analysts in Europe and the United States released reports on Tuesday adding that pricing pressure is likely to keep oil prices in a bear market for the near term.
