Greece says no to more austerity, Varoufakis steps down and Chinese authorities struggle to stop the stock market rot. Here are some of the things that people are talking about in markets this morning.
Greece votes 'no'
Greece has voted overwhelmingly against more austerity with 61 percent of votes backing the government's rejection of further spending cuts and tax increases. The result sets up a showdown with Greece and its creditors in the coming week. German Chancellor Angela Merkel will be in Paris today to meet with her French counterpart ahead of an emergency summit of Euro-area leaders scheduled for Tuesday. The ECB's Governing Council is due to convene later to discuss the Greek financial sector.
Last week, Yanis Varoufakis told Bloomberg he would quit if Greece voted 'yes': Despite a 'no' vote, he reached for the exit door anyway. In this tweet, Varoufakis announced he would step down to help the Greek government secure a deal with creditors. In a blog post, Varoufakis said “I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday’s referendum. And I shall wear the creditors’ loathing with pride.”
Grexit the base case scenario
Following the referendum result, economists from both JPMorgan and Barclays moved to make a Greek exit from Europe's currency union their base case scenario. Morgan Stanley said there's a 75 percent chance Greece leaves, up from 60 percent last week, SocGen put it at 65 percent and BNP Paribas increased the probability of an exit to 70 percent, up from just 20 percent a week ago.
Markets react to Greece vote
A bout of risk aversion is running through financial markets this morning. In the FX market, the euro is weaker dropping below $1.10 in Asian trading before rebounding after Varoufakis announced his departure. In the bond market, money is pouring into the perceived safety of German and U.S. government debt while bonds in Spain and Italy decline. European stocks are also lower but the declines across equities and peripheral bonds pale in comparison to the plunge last Monday after the referendum was first announced.
China steps in again
After the biggest three-week rout for Chinese stocks since 1992, Chinese authorities tried once again to stabilize the market: Authorities suspended IPOs, state media urged investors not to panic and brokerages even reached for the 1929 playbook by pledging to buy stocks. Despite the measures, the Shanghai Composite endured another choppy day finishing the session up 2.41 percent, the Shenzhen Composite dropped 2.7 percent and the ChiNext measure of smaller companies plunged 4.3 percent.
What we've been reading
Here's what caught our eye over the weekend
How do you say “Whatever it takes” in Mandarin?
The cities that make up the biggest economy on earth.
10 consequences of Greece’s ‘No’ referendum result.
When Irish banks closed in the 1970s, publicans stepped into the breech.
Self-driving cars will do so much more than drive.
Long promised diamond supply gap stubbornly refuses to materialize.
1. Referendum. 2. ???? 3. Prosperity!
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