Equities moved sharply higher in early Monday trading after Greece agreed to accept creditors demand in return for a to be determined bailout package. The downside for Greece is deal demands acceptance of creditor control over Greek national finances.
Since we’re focused on the week ahead, the deal should be positive for the markets because it papers over current problems with more money. Over the long-term, there is still a question of whether this will work. Putting aside the political complications, it will still be a difficult time for the Greek people because they must grow their way out of debt and they have failed thus far. Additionally, only a week ago Greek citizens rejected far less onerous bailout terms and certainly didn’t agree to have their sovereignty given away. The Greek prime minister put out a statement today, which reads in part:
“We were aware that it would not be an easy task, but we have created a very important legacy. An important legacy, and a much-needed change throughout Europe. Greece will continue to fight, and we will continue to fight, so that we can return to growth, regain our lost national sovereignty. We earned our popular sovereignty. We sent a message of democracy, a message of dignity throughout Europe and the world. This is the most important legacy”.
The fallout from this deal will echo for years and could be the boost needed to catapult rising anti-euro and anti-EU parties from the periphery to the mainstream of the political debate.
A significant amount of economic data will be released over the coming days. June retail sales, producer price inflation, CPI and housing starts all come out this week. The Atlanta Fed’s GDP Now model forecasts 2.3 percent growth but this data has the potential to significantly change this number. The 10-year treasury yield is near its high for the year on Monday, trading at 2.44 percent. Any upside surprise in the data could easily push the yield above 2.50 percent, which would constitute a bullish breakout. China’s second quarter GDP is due Tuesday night and commodity prices will be volatile as a result. Last quarter, the country reported growth of 7 percent year over year, but less than 6 percent at an annualized rate.
Earnings season kicks off this week with the major banks leading the way. Wells Fargo (WFC), Bank of America (BAC), Citigroup (C) Goldman Sachs (GS) and J.P. Morgan (JPM) are some of the financial names reporting. Financials are expected to report 4.5 percent growth in the second quarter. Netflix (NFLX) and Google (GOOG) are two big technology names that will report earnings. Ebay (EBAY) will spin off its Paypal division on Friday and will trade under the symbol PYPL.