European stock
and bond markets are set to take a sharp hit on Monday after Greece
voted 'No' to harsh bailout conditions, and bankers said the European
Central Bank's response was now key to the extent of contagion.
Many
economists, including those at U.S. banking giant JPMorgan, reckon the
outcome of Sunday's referendum will probably hasten Greece's exit from
the euro.
"Although the situation is fluid, at this point Greek exit from the euro appears more likely than not," JPMorgan's Malcolm Barr told clients on Sunday evening, adding 'Grexit' was now the bank's "base case".
As Asia-Pacific currency trading got underway, the euro fell more than 1 percent against the U.S. dollar EUR= and more than 2 percent against Japan's yen EURJPY=.
The ECB's decision on whether to
continue emergency funding to Greek banks - closed for the past week and
enforcing capital controls on deposit withdrawals - will now be
critical. People familiar with the matter told Reuters on Sunday the ECB would continue funding at last week's restrictive levels.
But many banks said the central bank may also have to issue a statement on anti-contagion measures - perhaps holding out the possibility of accelerating or expanding its quantitative easing or bond buying program in order to calm wider markets.
Earlier on Sunday, ECB Executive Board member Benoit Coeure said the bank was prepared for all outcomes.
"The ECB has been clear that if we need to do more we will do more. We will find the necessary instruments," Coeure said at an economics conference in Aix-en-Provence, southern France.
Barclays strategists were gloomier, seeing a move out in Italian spreads to as wide as 200 basis points.
Gary Jenkins, chief credit strategist at ING Capital, said: "Unless there is a pre-market announcement by the ECB I expect the market to be in turmoil."
Euro equity markets too, which had one of their worst weeks of 2015 last week, were set for another selloff.
"The ECB has the capacity to limit the spread of contagion. But we might still see a fall of 3 percent on European markets on Monday," said Antonin Jullier, head of equity trading strategy at Citi.
"Although the situation is fluid, at this point Greek exit from the euro appears more likely than not," JPMorgan's Malcolm Barr told clients on Sunday evening, adding 'Grexit' was now the bank's "base case".
As Asia-Pacific currency trading got underway, the euro fell more than 1 percent against the U.S. dollar EUR= and more than 2 percent against Japan's yen EURJPY=.
But many banks said the central bank may also have to issue a statement on anti-contagion measures - perhaps holding out the possibility of accelerating or expanding its quantitative easing or bond buying program in order to calm wider markets.
Earlier on Sunday, ECB Executive Board member Benoit Coeure said the bank was prepared for all outcomes.
"The ECB has been clear that if we need to do more we will do more. We will find the necessary instruments," Coeure said at an economics conference in Aix-en-Provence, southern France.
Barclays strategists were gloomier, seeing a move out in Italian spreads to as wide as 200 basis points.
Gary Jenkins, chief credit strategist at ING Capital, said: "Unless there is a pre-market announcement by the ECB I expect the market to be in turmoil."
Euro equity markets too, which had one of their worst weeks of 2015 last week, were set for another selloff.
"The ECB has the capacity to limit the spread of contagion. But we might still see a fall of 3 percent on European markets on Monday," said Antonin Jullier, head of equity trading strategy at Citi.
No comments:
Post a Comment