Greek Deadline Looms Large

Greece and Germany continue to trade barbs ahead of the countdown to repaying the International Monetary Fund debt.  Today marks the deadline to unlock the next tranche of bailout funds or invariably let Greece miss debt repayments and be in a state of default.  After being called “foolishly naïve” by German Finance Minister Schaeuble, Greek Finance Minister Varoufakis shot back stating the Greeks would not be able to repay their debts.  These remarks highlight the distance between the sides at the negotiating table as decision time rapidly approaches.  On the macro front, Euro Area industrial production fell -0.10% month over month after expanding at an annualized pace of 1.20%.  After squeezing higher, EURUSD is trending back to the downside, trading marginally above 1.0600.

In a second sign of the growing deflationary threat facing China, wages are falling across the 4 largest Chinese cities.  When accompanied by the persistent deflationary forces acting upon producer prices, this is setting up the People’s Bank of China to undertake far more monetary easing than previously bargained.  Although the PBOC and Ministry of Finance remain at odds, difficult liquidity conditions will force the decision-making process. Asian equity benchmarks largely carried over the strength from the American session led by the 1.39% gain in the Nikkei 225 which crossed the 19,000 threshold for the first time since the year 2000.  Chinese equities also gained, with the Shanghai Composite posting gains of 0.70%.  USDJPY is slightly stronger on the session, rising 0.05%, although still trading well below recent highs.