TSX, Dow bounce upwards despite Greek crisis
Markets in North America bounced higher on Tuesday, as Greece approached the deadline to make its 1.6-billion euro ($2.2 billion Cdn) debt payment to the International Monetary Fund.
The TSX/S&P index was up 63 points at the close of trading to 14,553 and the Dow came back 43 points to 17,619. The gains followed deep declines on Monday, with the TSX down 2 per cent and the Dow dropping 1.9 per cent as Greece limited bank withdrawals and announced a referendum on the EU's austerity package.
Although talks were ongoing during the trading day, there are indications Greece will not make its debt payment.
Markets are likely to be volatile all week, leading up to the July 5 referendum. Greek Prime Minister Alexis Tsipras has recommended his people reject EU demands, which would cut pensions and boost taxes.
In Europe, markets recovered in earlier trading amid news that the Greek government has made a last-minute effort to break the deadlock with its creditors.
But by the close of trading, the Stoxx index of all European markets was down 44 points or 1.3 per cent and markets in Europe were lower across the board.
BMO's chief economist Doug Porter says markets are nervous because the next steps for Greece are unclear.
"We could be in what somebody called Grimbo for another couple of months," he told CBC News.
If Greece cannot come to a deal with its lenders, it could abandon the euro and return to the drachma.
That could shake confidence in the shared currency, but most analysts say it won't be a repeat of the 2008 financial crisis.
"The most likely scenario in the event of a Greek default and the country's departure from the eurozone is not a global economic crisis. Greece's economy contributes less than two per cent of European GDP and it is so tiny that its output is equal to that of Pakistan," said BMO analyst Jack Ablin.
Oil up, dollar down
Private lenders have been avoiding Greek debt for years, so most of the money it owes – a substantial 250 billion euros ($347 billion Cdn) – is to international lenders such as the IMF and the European Central Bank.
"Greece is a tiny economy and eventually the markets will be able to look through the uncertainty and realize that this is most likely an isolated case," he wrote in a note to investors.
Investors cannot discount the Greek crisis, but North American stocks appear to have shaken it off somewhat today. Instead stocks and the dollar are moving on other factors.
In Canada, there was the news that the economic downturn continued into April, with GDP shrinking 0.1 per cent, a little less than expected.
The Canadian dollar lost half a cent today, to trade at 80.13.
But on oil, there was better news, with West Texas Intermediate, which dropped in price yesterday, moving up $1.04 on Tuesday to $59.37 US a barrel. Brent oil, which might be sensitive to any economic downturn in Europe, also moved higher, up $1.52 to $63.53 US a barrel.
