6th Jul 2015 06:37
LONDON (Alliance News) - UK equities are set to open heavily lower Monday after the Greek people voted 'no' in the referendum over the weekend on whether or not to accept bailout proposals from Greece's creditors.
But futures and the euro have recovered some of their previous losses after Greek Finance Minister Yanis Varoufakis resigned in the morning. Varoufakis said in a blog post that he was made aware of a preference by some Eurogroup participants, and assorted 'partners', for his 'absence' from its meetings. He said the Prime Minister judged his absence to be potentially helpful to him in reaching an agreement.
"And I shall wear the creditors' loathing with pride," he added.
The euro trades the dollar at USD1.10530 ahead of the open, but had fallen to a low of USD1.0968 on Sunday as it became increasingly clear that the Greek people would reject the bailout terms.
In the referendum Sunday, the 'no' vote received 61.3% of the vote, according to the Interior Ministry in Athens, with 'yes' finishing at 38.7%. The wide margin held steady throughout the counting process, after opinion polls had showed the vote too close to call. Athens said it was willing to resume talks with international creditors, and eurozone leaders were planning an emergency summit Tuesday to tackle the crisis.
In an address on national television, Greek Prime Minister Alexis Tsipras said the referendum was a mandate not against Europe but for "a sustainable solution," saying that renegotiating Greece's debt must now be on the table in renewed talks. He warned that there "are no easy solutions," but a "fair" conclusion could be reached by both sides. Tsipras said he would seek a meeting Monday of leaders from Greek political parties.
After the referendum result was clear, EU President Donald Tusk announced the summit meeting for the 19-member eurozone. Eurogroup chief Jeroen Dijsselbloem said his group of eurozone finance ministers will meet Tuesday prior to the summit.
Investors will also be keen to see the reaction of the European Central Bank, with Greek banks in dire need of the ECB's emergency liquidity assistance.
"The Greek 'no' puts the European Central Bank in a most difficult position. Without a clear prospect of an immediate bailout deal that could prevent a full-scale sovereign default after Greece?s de facto default on the [International Monetary Fund] last week (already called a default by the European bailout fund), it is very hard for the ECB to authorise continuing emergency support for Greek banks, let alone to allow an increase in such support tomorrow," says Holger Schmieding, chief economist at Berenberg.
"We look for the ECB to tread very cautiously, though, perhaps even seeing to it that small amounts of euro cash could still be withdrawn from Greek cash machines for a while until the political outlook becomes clearer, perhaps after an emergency EU summit. However, an increase in liquidity support for Greek banks to allow them to open again for serious business in euros looks quite unlikely," Schmieding adds.
IG says futures point the FTSE 100 to open 50 points lower at 6,535.8, having earlier been called down close to 100 points. The index closed down 0.7% at 6,585.78 on Friday.
US stock markets will be trading again Monday after the Independence Day holiday on Friday.
In Asia Monday, the Japanese Nikkei closed down 2.1%, the Hang Seng trades down 4.1% but the Shanghai Composite up 0.7%.
Rolls-Royce Holdings said it has slashed its guidance for 2016 due to problems afflicting its Civil Aerospace and Marine divisions. The FTSE 100-listed aerospace and engineering group also will discontinue its current GBP1 billion share buyback programme, having completed half of it in the first half.
Providing more positive news, housebuilder Bovis Homes Group outlined plans to increase its interim dividend after it said home sales rose in the first half of 2015 at higher prices. Bovis said it is planning to hike its interim dividend for the six months to June 30 to 13.7 pence per share, up 14% from the 12.0 pence per share payout it made a year earlier.
The bigger payout to shareholders follows a rise in legal completions in the first half to 1,525 homes, up from 1,487 a year earlier and a record sales volume for the company in the half. For the full-year, the group expects to legally complete 3,505 homes, up from 3,297 in 2014.
Low-cost airline easyJet said its customer traffic and its load factor both improved in June. The budget carrier said it carried 6.6 million passengers in June, up from 6.1 million a year earlier, for a 7.6% rise. On a rolling 12-month basis, passenger numbers are up 5.9% to 67.1 million, it said. It also said its load factor for the month improved, up by 0.7 percentage point to 92.7% from 92.0% a year earlier.
In the economic calendar, eurozone Sentix investor confidence is at 0930 BST. In the afternoon there is US Markit service and composite purchasing managers' index at 1445 BST, ISM non-manufacturing PMI at 1500 BST alongside labour market conditions index.
By Neil Thakrar; [email protected]; @NeilThakrar1
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