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Greece imposes capital controls as crisis deepens


ATHENS Greece moved to check the growing strains on its crippled financial system on Sunday, closing its banks and imposing capital controls that brought the prospect of being forced out of the euro into plain sight.

After bailout talks between the leftwing government and foreign lenders broke down at the weekend, the European Central Bank froze vital funding support to Greece’s banks, leaving Athens with little choice but to shut down the system to keep the banks from collapsing.

Banks will be closed and the stock market shut all week, and there will be a daily 60 euro limit on cash withdrawals from cash machines, which will reopen on Tuesday. Capital controls are likely to last for many months at least.

“The more calmly we deal with difficulties, the sooner we can overcome them and the milder their consequences will be,” a somber-looking Prime Minister Alexis Tsipras said in a televised address. He promised bank deposits would be safe and salaries paid.

Even as Tsipras spoke late on Sunday, lines forming at petrol stations and in front of the dwindling number of bank machines that still contained cash highlighted the scale of the disaster facing Greeks, who have endured more than six years of economic decline.

The failure to reach a deal with creditors leaves Greece set to default on 1.6 billion euros of loans from the International Monetary Fund that fall due on Tuesday. Athens must also repay billions of euros to the European Central Bank in the coming months.

The impending default on the IMF loans leaves Greece sliding toward a euro exit with unforeseeable consequences for Europe’s grand project to bind its nations into an unbreakable union by means of a common currency. It also carries broad implications for the global financial system.

After months of wrangling, Greece’s exasperated European partners have put the blame for the crisis squarely on Tsipras’ shoulders. The 40-year-old premier caught them by surprise in the early hours of Saturday by rejecting the demands of lenders and calling a referendum on the bailout.

The creditors wanted Greece to cut pensions and raise taxes in ways that Tsipras has long argued would deepen one of the worst economic crises of modern times in a country where a quarter of the workforce is already unemployed.

After announcing the referendum, Tsipras asked for an extension of Greece’s existing bailout until after the July 5th vote. Euro zone officials refused, and in his televised address Tsipras bemoaned the refusal as an “unprecedented act”.

Despite the hardening of positions, officials around Europe and the United States made a frantic round of calls and organized meetings to try to salvage the situation.

U.S. President Barack Obama called German Chancellor Angela Merkel, and senior U.S. officials including Treasury Secretary Jack Lew, who spoke to Tsipras, urged Europe and the IMF to come up with a plan to hold the single currency together and keep Greece in the euro zone. The German and French governments announced emergency political meetings.

French Prime Minister Manuel Valls urged the Greeks to come back to the negotiating table.

“I cannot resign myself to Greece leaving the euro zone … We must find a solution,” Valls told Europe 1, Le Monde and iTELE in a joint interview.

SAFE HAVENS SOUGHT

The euro fell sharply against the dollar and safe-haven U.S. government debt futures rallied as investors exhibited fears of a Greek default and exit from the euro zone. “That is going to have a real big impact on markets and that will generate increased volatility,” said Ian Stannard, European head of FX strategy at Morgan Stanley in London. The euro EUR= fell nearly 2 U.S. cents to a one-month low in early Asia Pacific trade. The fear of contagion produced a sharp move into safe-haven government debt. U.S. 10-year Treasury futures rose 1 27/32 in active trading early.

The bank holiday announced by Tsipras will last at least until Monday, July 6, the day after the planned referendum, an official said after a late-night meeting of the cabinet. The Athens stock exchange will be closed as the government tries to manage the financial fallout.

It remains unclear how long capital controls will remain in force. In Cyprus, which imposed similar measures in 2013, they were not fully lifted until April this year.

Tsipras faces growing political pressure with some opinion polls suggesting a majority of Greeks could turn their back on his call to reject the bailout and instead decide to support the lenders’ package in next Sunday’s referendum.

If they do, he would face pressure to resign, leaving the way open for new elections.

Former conservative Prime Minister Antonis Samaras, who on Sunday met Greek head of state President Prokopis Pavlopoulos, said Tsipras should drop the referendum plans and return to the negotiations or make way for a government of national unity.

As speculation of capital controls have increased over the past two weeks, Greeks have pulled billions of euros out of their accounts. Long queues formed in supermarkets on Saturday as shoppers stocked up on essentials.

Greece’s top refiner, Hellenic Petroleum, said it had enough fuel reserves on hand to last for many months, but there were reports of long queues forming at petrol stations as motorists rushed to fill up.

The broader consequences for Greece’s economy, now back in recession, are likely to be severe, with the tourism sector, which accounts for almost a fifth of economic output, about to start its vital summer season. Anxious to reassure tourists, the government said the 60 euro cash withdrawal limit would not apply to people using foreign credit or debit cards.

Travel companies had been warning tourists for some weeks that they should be prepared to take extra cash, given the likelihood of problems with the system. But the sight of cash machines that had run dry was a visible shock to many tourists.

    “I am trying to go over to the bigger banks,” said Cassandra Preston, a Canadian tourist who was searching around in central Athens for a machine that had cash. “I am here for another month and I would like to make sure I have some cash on me.”

Many leading economists have voiced sympathy with the Greek government’s argument that further cuts in spending risk choking off the growth that would give Greece some prospect of servicing debts worth nearly twice its annual national income.

However, in economic powerhouse Germany, other southern states that have endured austerity in return for EU cash and poor eastern countries with living standards much lower than Greece’s, many voters and politicians have run out of patience.

German Finance Minister Wolfgang Schaeuble openly questioned the solvency of Greek banks, a key condition to qualify to receive such finance.

“The ECB has always said that as long as Greek banks are solvent, then emergency loans, the ELA, can be granted,” he said on Saturday. “And now there is naturally a new situation that because of the developments the liquidity and solvency of Greek banks, or some Greek banks, could be in doubt.”

(Additional reporting by Deepa Babington, George Georgiopoulos, Karolina Tagaris, Michele Kambas, Lefteris Karagiannopoulos, Matthias Williams in Athens; Writing by Anna Willard and James Mackenzie; Editing by Alastair Macdonald, Janet McBride, Alessandra Galloni, Toni Reinhold)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/M23fAL8-kIs/story01.htm

Euro, stocks plunge as Greece seen on course to default


TOKYO The euro fell almost 2 percent and share prices tumbled across Asia on Monday as Greece looked set to default on its debt repayment this week, forcing Athens to impose capital controls to halt bank runs.

With the prospect of Greece being forced out of the euro in plain sight, the common currency fell as much as 1.9 percent to $1.0955 EUR=, its lowest in almost a month, and last stood down 1.4 percent at $1.1007.

Against the yen, the common currency dropped more than 3 percent to 133.80 yen, a five-week low.

U.S. stock futures dived almost 2 percent ESc1 at one point to hitting a three-month low, and last traded down 1.6 percent.

Japan’s Nikkei .N225 fell 2.1 percent while MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dropped 0.8 percent, drawing little help from more policy easing from China’s central bank at the weekend.

Chinese stocks have plunged over 20 percent in the last two weeks, hit by tight liquidity conditions ahead of the quarter-end and uncertainty over the central bank’s monetary policy.

Investors are flocking to safer assets, staggered at huge uncertainty on the future of Europe, as Greece could become the first country to leave the currency bloc after a default.

The 10-year U.S. Treasury yield fell 0.16 percentage point to 2.317 percent US10YT=RR.

The yen, which tends to gain at time of financial stress, strengthened against the dollar to hit one-month high of 122.10 to the dollar JPY=.

“We are in uncharted territory and European equities, like all markets, will have a difficult time processing this,” said Deutsche Bank Managing Director Nick Lawson.

“The market was not positioned for this going into the weekend and the lack of liquidity that has impacted both sovereign and corporate debt markets, as well as equity recently, will exacerbate things.

Cash-strapped Greece looks certain to miss its debt repayment to the IMF on Tuesday as Greece’s European partners shut the door on extending a credit lifeline after Greece’s surprise move to hold a referendum on bailout terms.

Fear of an imminent default by Greece hit Greek banks, a major buyer of Greek government bills, triggering bank runs at weekend and forcing Prime Minister Alexis Tsipras to announce a bank holiday and capital controls.

Conspicuous by its absence so far from this year’s Greek drama has been contagion to other “peripheral” euro nations government bond markets as other European banks have limited exposure to Greece.

Any speculative selling of debt of such countries as Italy, Spain and Portugal will also likely be countered by the European Central Bank, which started buying euro zone sovereign debt from markets in March to shore up the economy.

Yet the perception could change if investors grow more worried about the future of the currency union, as whether Greece can stay within the euro zone after default will be called into a question.

“Financial markets will say ‘it’s all Greek to me’. Markets will reset their trend until last week and will start the week with risk aversion,” Yasunobu Katsuki, senior analyst at Mizuho Securities.

Some investors think Greece’s attempt to abandon the austerity program — and possibly reset its economy through currency devaluation — could fuel more scepticism toward the euro project among the populace in other euro zone countries.

Gold prices gained 0.9 percent to $1,185.50 per ounce XAU= on safe-haven buying, while Brent crude oil futures LCOc1 fell 1.2 percent to $62.52 per barrel.

(Additional reporting by Jemima Kelly in London; Editing by Diane Craft Kim Coghill)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/nSlV9HL1KJU/story01.htm

Fed’s Dudley says September rate hike ‘very much in play’: FT


NEW YORK A September interest rate hike is “very much in play” if the U.S. economy continues to strengthen, though the Federal Reserve could also wait until December to start tightening policy, an influential Fed official said in a newspaper interview.

New York Fed President William Dudley, quoted in the Financial Times, said, “It would not shock me if we decided to lift off in September, or it wouldn’t shock me if the data were a little softer and it caused us to wait.”

Dudley, a dovish policymaker who is a close ally of Fed Chair Janet Yellen, was said to cite recent U.S. wage gains, income, and household spending as having improved his outlook for the economy.

Greece, which is in a tense standoff with its European creditors, remains a “huge wild card,” he said.

“If we hit 2.5 percent growth in the second quarter and it looks like the third quarter is shaping up for something similar, then I think you are on a firm enough track that you would imagine you would have made sufficient progress” in the Fed’s inflation and employment goals to raise rates “certainly by the end of the year,” Dudley was quoted as saying.

(Reporting by Jonathan Spicer; Editing by Toni Reinhold)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/kbUFBs1kBpY/story01.htm

Euro, stock futures plunge on Greece default fears


TOKYO (This version of the story was refiled to correct grammar in first paragraph)

U.S. stock futures and the euro fell almost 2 percent in early Asian trade on Monday as Greece looks set to default on its debt repayment this week, forcing Athens to impose capital controls to halt bank runs.

The euro fell as much as 1.9 percent to $1.0955 EUR=, its lowest level in almost a month. Against the yen, the common currency dropped more than 3 percent to 133.80 yen, a five-week low.

U.S. stock futures dived 1.8 percent ESc1, hitting a three-month low, while U.S. Treasuries futures price TYv1 gained almost two points.

Asian shares look set to open lower, despite the Chinese central bank’s monetary easing on Saturday, as investors are seen flocking to safer assets on the spectre of an unprecedented debt default by a euro zone country.

A cash-strapped Greece looks certain to miss its debt repayment on Tuesday as Greece’s European partners shut the door on extending a credit lifeline after Greece’s surprise move to hold a referendum on bailout terms.

Fear of an imminent default by Greece hit Greek banks, a major buyer of Greek government bills, triggering bank runs at weekend and forcing Prime Minister Alexis Tsipras to announce a bank holiday on Monday and capital controls.

Other European banks have limited exposure to Greece.

Any speculative selling in debts of such countries as Italy, Spain and Portugal, will likely be countered by the European Central Bank, which started buying euro zone sovereign debts from markets in March to shore up the economy.

Yet the perception could change if investors grow more worried about the future of the currency union, as whether Greece can stay within the euro zone after default will be called into a question.

“Financial markets will say ‘it’s all Greek to me’. Markets will reset their trend until last week and will start the week with risk aversion,” Yasunobu Katsuki, senior analyst at Mizuho Securities.

(Editing by Diane Craft)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/ZuW68UZwbi8/story01.htm

China’s banks dominate rankings for profits, strength


LONDON China’s banks are strengthening their position as the best capitalized and biggest profit makers in the world, a study showed on Monday.

Chinese banks filled the top four spots for profits across the industry in 2014 after making more than $180 billion between them, according to The Banker magazine’s annual rankings of profits and capital strength. Chinese lenders collectively earned almost double the amount of their U.S. rivals, the data showed.

Industrial and Commercial Bank of China’s (ICBC) (601398.SS) $59.1 billion profit last year topped the rankings, ahead of China Construction Bank (601939.SS), Agricultural Bank of China (Agbank) (601288.SS) and Bank of China (601988.SS).

U.S. bank Wells Fargo (WFC.N) ranked fifth with a $33.8 billion profit, followed by JPMorgan (JPM.N) and HSBC (HSBA.L).

ICBC also topped The Bankers’ ranking of the strongest banks in the world for the third year, which is based on the amount of capital held, in amount rather than as a ratio of assets. The magazine says that method best reflects banks’ ability to lend on a large scale and endure shocks.

China had four names in the top six strongest banks. There were four U.S. banks in the top 10 – JPMorgan was third and Bank of America (BAC.N) was fifth – and one British and one Japanese bank.

China’s big state-backed banks are growing in size and importance, fueled by their dominance of a huge domestic market. They are growing internationally, but still have relatively modest overseas assets.

In contrast, some of the most international U.S. and European banks are slipping down the rankings as they close businesses and shed assets to try to improve profitability.

HSBC slipped to ninth at the end of last year (from fifth in 2013) and Citigroup (C.N) was seventh (from sixth). HSBC, Citi and Royal Bank of Scotland (RBS.L) were the top three banks in terms of capital just before the financial crisis in 2008.

The Banker said in most regions banks increased their profits last year from 2013.

The best returns on capital were made by banks in South America at an average of 26 percent, followed by 24 percent for African banks, 19 percent in Asia and 15.5 percent in North America. Returns in Britain averaged 7.3 percent and lagged at 4.6 percent in the Eurozone, The Banker said.

Italian and Greek banks made the biggest losses last year, with Banca Monte dei Paschi di Siena (BMPS.MI) the worst performer with a $9.3 billion loss.

(Reporting by Steve Slater, editing by William Hardy)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/-dcrChAQD0g/story01.htm

Wave of contagion expected after dramatic weekend raises ‘Grexit’ chances


LONDON Global financial markets are braced for a wave of contagion from Greece on Monday, with expected heavy losses for southern European government bonds and regional stock markets as investors scramble to discount a possible “Grexit” that most had still assumed was unlikely as late as Friday afternoon.

Greece will keep its banks closed on Monday and implement capital controls after international creditors refused to extend the country’s bailout.

“That is going to have a real big impact on markets and that will generate increased volatility,” said Ian Stannard, European head of FX strategy at Morgan Stanley in London.

The Athens stock exchange will also be closed on Monday as the country tries to limit the financial fallout of the disagreement with the European Union and the International Monetary Fund.

U.S. equity futures dropped sharply at the beginning of trading Sunday, as the chances that Greece will default on its debt and exit the euro zone grew.

Greek Prime Minister Alexis Tsipras late on Friday surprised creditors by calling a snap referendum on what he said were the unacceptable terms offered to keep the country from bankruptcy.

Greece’s European partners on Saturday shut the door to extending the existing credit lifeline beyond Tuesday night’s deadline, an extension that would have accommodated the planned July 5 referendum. The European Central Bank on Sunday then capped the amount of emergency financing it extends to Greek banks at last week’s levels despite reports of further heavy deposit withdrawals over the weekend.

Without new bailout funds, Athens is due to miss a 1.6 billion euro ($1.8 billion) repayment to the International Monetary Fund on Tuesday.

Conspicuous by its absence so far from this year’s Greek drama has been contagion to other “peripheral” euro nations government bond markets as was the case during the last peak in Greek and euro tensions in 2012. Greek yields have soared, those of Italy, Spain and Portugal have not.

But that could well change on Monday, said analysts, unless the ECB takes measures to contain it.

“There is a risk that peripheral government bond spreads surge to stress levels,” wrote ABN Amro analysts in a research paper. “The ECB needs to be ready to activate its OMT (outright monetary transactions) program to restore calm if necessary.”

Goldman Sachs said earlier this year that a Grexit could see Italian and Spanish 10-year bond premia over Germany almost trebling to as much as 400 basis points – a shock to all related European financial pricing although still some 200 basis points shy of peaks hit during the winter of 2011/12.

The euro EUR= fell nearly 2 U.S. cents to a one-month low in early Asia Pacific trade on Monday.

Last week, Goldman said the euro could drop three full cents immediately after a Greek default but a further 7 big figures over the following weeks as the ECB stepped up its anti-contagion bond buying programs of OMT and quantitative easing.

And it is these possible anti-contagion measures that make trading bonds and stocks at least fraught with difficulty over the coming week – and not a simple one way bet on the shock. What’s more, the traditional safety of German government bonds in such a crisis has been challenged due to severe liquidity shocks in that market this year also.

Safe-havens outside the euro zone, as a result, may well get a bigger boost. These include the Swiss franc and U.S. Treasuries, with the financial stress creating a dilemma for the Swiss and possibly even the U.S. central bank.

“We would put a high probability on Swiss National Bank intervention” to sell francs for euros, wrote Citi FX strategist Josh O’Byrne.

Even though euro stock prices have held up remarkably well during recent weeks of twists and turns in Greece’s debt drama, European stock-market volatility has been propelled to six-month highs and knocked some 4 percent off European stocks since April .FTU3.

“We are in uncharted territory and European equities, like all markets, will have a difficult time processing this,” said Deutsche Bank Managing Director Nick Lawson.

“The market was not positioned for this going into the weekend and the lack of liquidity that has impacted both sovereign and corporate debt markets, as well as equity recently, will exacerbate things.

CONTAGION CONCERNS

In a sign of the volatility expected in the markets, FX broker FXPro said in a note on its website on Saturday that it may limit euro trading to the closing-out of existing positions, and may increase margin requirements on euro pairs “in order to reduce the risk of trading euro pairs”.

But the impact of the debt crisis in FX has been less clear than in other markets. The euro last week fell sharply when it appeared that Greece and its creditors were getting closer to a deal, as stocks rose.

“The euro is behaving in an inverse manner to equity markets,” said Morgan Stanley’s Stannard, who said the impact on the euro would be determined by just how far risk appetite is affected.

“But if investor sentiment turns even more negative and you get an outright outflow from Europe, then obviously you don’t get that supportive factor and that could leave the euro vulnerable.”

Other analysts said the euro, which is currently worth around $1.0990, would fall either way, while safe havens, such as the yen, Swiss franc, and even sterling, would benefit.

“When (it) becomes clearer banks are out of cash or that the IMF won’t be paid … euro could be down more than 2 figures,” said Citi strategist O’Byrne

(Additional reporting by John McCrank in New York and Lionel Laurent in London; Editing by Mike Dolan, Ralph Boulton and Diane Craft)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/lfRn39A4D7I/story01.htm

Slowboat to China: No quick fix for luxury yacht firm Ferretti


SARNICO, Italy/SINGAPORE When Chinese industrial conglomerate Weichai Group snapped up cash-strapped Italian luxury yacht builder Ferretti in 2012, the deal looked like a match made in heaven.

Debt-laden Ferretti, known for the elegant Riva speedboats favored by film star Sophia Loren, was the world’s top maker of large motor yachts and cash-rich Weichai saw an opportunity to offer luxury leisure to the growing ranks of Chinese billionaires.

Three years on, wealthy Chinese are yet to fully embrace the appeal of messing about in boats and Ferretti, which has since slipped to No.3 among global super yacht builders according to an annual order book survey by industry publisher Boat International, is still loss-making.

“The market is not that big, the market is not that fast,” said Fabiomassimo Discoli, a Hong Kong-based sales manager for Ferretti, adding that the company had found it needed to adapt its boats to the different tastes of Asian owners, especially mainland Chinese.

“They don’t sleep on board and just use the boats for entertainment purposes,” said Discoli, speaking at the Singapore Yacht Show aboard a 21-metre (69 ft) Ferretti Yachts 690 that carried a 3 million euro price tag. “They bring their customers… do karaoke … and smoke cigars.”

The example of Ferretti underscores the difficulties Chinese buyers face in extracting quick returns from a global brand at a time when they are gobbling up Western assets as never before.

The weak euro is making companies in countries such as Italy or Portugal attractive, as the March purchase of tyremaker Pirelli by China National Chemical Corp shows. Chinese buyers poured $18.8 billion into European assets in 2014, the highest since 2008, and topped that figure in the first half of 2015 alone, Thomson Reuters data shows.

But financial muscle alone is not enough to master a brand, and question marks hang over the ability of many Chinese buyers to leverage exports into their home market in times of slow growth.

Ferretti Chief Executive Alberto Galassi, appointed by Weichai in May last year to try to revive the Italian group’s fortunes, expects the company to return to net profit in 2017.

Weichai’s original Ferretti management team had envisaged the firm breaking even by the end of 2013.

“The Chinese bought an industrial plan that after two years did not produce results,” Galassi said in an interview at the firm’s historic Riva shipyard in Sarnico, on the shores of Lake Iseo in northern Italy. “They value their investment but they also want returns.”

Weichai declined to comment.

A MILLION MILLIONAIRES

China has more than 1 million millionaires and 67,000 super-rich with 100 million yuan ($16 million) or more, according to the 2014 Hurun Wealth Report, an annual China rich list.

But the number of luxury yachts sold is still low. Only around 0.3 percent of Chinese with financial assets of at least $1 million own a yacht, according to a 2011 study by the Italian Trade Commission.

The problem is partly cultural. For Europe’s wealthy boat owners, sleek motor yachts conjure images of lazy family holidays along the sun-kissed Mediterranean coast.

Well-off Chinese tend to shun the sun, China’s coastline lacks the appeal of southern Europe or Thailand and a boat is seen more as a business asset than a family plaything.

Taking out a client on a yachting trip has also become less socially acceptable since Chinese President Xi Jinping ramped up a crackdown on corporate corruption, leaving many fearful of becoming a target of official scrutiny.

    “The current mood in China is not about conspicuous spending,” said Jean-Marc Poullet, the Asia chairman-designate of Burgess, a yacht brokerage.

To address some of these issues, Ferretti is building a marina in Zhuhai, in China’s southern Guangdong province, where it plans to set up a plant to develop a new model for the local market by 2018.

A Chinese plant should also help overcome another problem, China’s 43 percent import tax on luxury goods.

Besides the 374 million euros ($419 million) spent on the acquisition, Weichai invested another 80 million euros via a capital increase, the bulk of which will be used to develop 27 new models over three years. The firm’s seven brands include Riva, Ferretti Yachts, Pershing and Itama.

Ferretti has nonetheless scaled back its expectations for the Asia-Pacific region to only around 15 percent of global sales, half what it originally forecast, and shelved plans for a Hong Kong listing.

It also declined to disclose sales figures for China.

Local politicians and unions – who clashed with company in the early days of Weichai’s ownership over a since-abandoned plan to close one of its Italian yards – now welcome the fact that Ferretti was saved by an industrial partner. But for the company to continue to operate in Italy, known for high labor costs and high taxes, the turnaround has to work.

“There is always the worry that the Chinese could just take our know-how,” said local union leader Luigi Giove. “But we should not forget that them coming in was a turning point for a group that was on the brink of collapse.”

(Additional reporting by Deena Yao in Hong Kong; Editing by Alex Richardson and Lisa Jucca)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/uWZHJ2Qiw94/story01.htm

Wall St. eyes Greece and Fed; Main St lackadaisical


SAN FRANCISCO Anxiety about Greece may keep Wall Street on edge early in the week, as the country moves toward what was once thought unthinkable: a default and a full exit from the euro zone.

While European markets are braced for a wave of contagion from Greece on Monday, as a result of a possible “Grexit” that most had still assumed was unlikely as late as Friday afternoon, the effect on U.S. markets is expected to be bumpy, but not as dramatic as in Europe.

Athens is due to miss a 1.6 billion euro ($1.8 billion) repayment to the International Monetary Fund on Tuesday. With its creditors unwilling to extend the country’s bailout, Greece’s banks will not open on Monday and capital controls are to be imposed.

The dollar gained against the euro in early Asian trading, and U.S. government bonds should see a safe-haven bid from investors wary of European equities.

The U.S. equity market will probably see some volatility on Monday, but safeguards against contagion introduced since 2010, when the possibility of a Greek default first shook markets, has many expecting only modest losses in U.S. stocks.

“Beyond volatility tomorrow, perhaps, there shouldn’t be much effect,” said Ken Fisher, founder and CEO of Fisher Investments. “Greece bank closure should be pretty fully discounted. That’s what markets do for a living.”

Wall Street’s reaction ahead of previous deadlines in Greek negotiations has been quiet compared with European financial markets. However, some U.S. investors expect more than just a rough session of trading.

“We’re coming up on zero hour for this crisis and it may well be that a number of investors will prefer to wait on the sidelines for the dust to settle,” said Alan Gayle, senior investment strategist at RidgeWorth Investments in Atlanta, which has $50 billion in assets under management.

MAIN STREET SHRUGS

One ray of hope for investors could be an unusually long streak of ambivalence on Main Street.

Seen by some as a contrarian indicator of future stock market performance, a weekly poll of individual investors showed positive sentiment for stocks remained below average for the 16th straight week despite a solid uptick in optimism.

The last time bullishness in the American Association of Individual Investors’ sentiment survey remained below average for so long was in August 2012.

Many professional investors view enthusiasm among do-it-yourselfers as a warning that the market may be overheating. Conversely, widespread caution is often taken as evidence that stock prices are well-grounded and not forming a bubble.

“The market climbs a wall of worry and if there’s some bearishness out there it means there’s potential buying power on the sidelines that could come back into the market,” said David Joy, chief market strategist at Ameriprise Financial in Boston, where he helps oversee $815 billion in assets under management.

Indeed, individual investors have pulled $56 billion from U.S. equity funds in the past 26 weeks, according to EPFR Global, which tracks fund-flow data.

While Greece’s financial instability and the possibility that the U.S. Federal Reserve could soon raise interest rates remain risks, Gayle, Joy and others said they still expect U.S. stocks to go higher over the medium term.

The strengthening economy suggests the Fed could raise interest rates this year even as inflation remains well below the U.S. central bank’s 2 percent target. Many economists expect a rate hike in September.

The SP 500 .SPX and tech-heavy Nasdaq .IXIC hit all-time highs in recent months, with markets bouncing back and forth in a limited range since around February as many investors fixate on the Fed.

Several data points next week will give fresh reads on the health of U.S. consumers in June as the Fed weighs when to increase rates.

On Thursday, Labor Department data is expected to show nonfarm payrolls increased by 232,000 in June, with the unemployment rate edging down to 5.4 percent from 5.5 percent in May. Consumer confidence is due on Tuesday and domestic car sales are due on Wednesday.

“The production side of the economy is doing OK,” said Joy. “It’s the consumer sector that’s most important for us right now. And of course, Greece.”

(Additional reporting by David Gaffen in New York; Edited by Linda Stern and Matthew Lewis)

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German, Dutch banks ‘well-prepared’ for Greek financial ructions


FRANKFURT German and Dutch banks said on Sunday said they were fortified against possible financial turmoil in Greece this week after the country announced it would keep banks closed on Monday and would introduce capital controls.

Greece’s international creditors refused to extend the country’s bailout in talks at the weekend, prompting savers to queue to withdraw cash from the country’s beleaguered banks and taking Athens’ standoff to a dangerous new level.

“We are very well-prepared because we’ve been anticipating a situation like this for a long time,” said a spokesman for Germany’s second biggest lender, Commerzbank (CBKG.DE).

The Athens stock exchange will also be closed on Monday as the government tries to manage the financial fallout of the disagreement with the European Union and the International Monetary Fund.

Germany’s biggest lender, Deutsche Bank (DBKGn.DE), said it felt well-prepared and was keeping a close eye on developments.

“Deutsche Bank has sufficient safety mechanisms in place to safeguard its business activities as well as those of its clients,” it said in a statement that was also echoed by DZ Bank, the lender at the center of Germany’s cooperative banking system.

Most large banks have established working groups to plan around scenarios of government and bank insolvencies, which can cause rapid collateral damage to other financial market players if for example, funds are transferred to a suddenly insolvent counter-party.

Banks have also been holding regular telephone conferences and conducting dry runs to make sure their systems are running properly, said a risk manager at a large German bank.

Dutch banks such as ING (ING.AS) and ABN AMRO are also seen as well-prepared.

ABN Amro spokesman Jeroen van Maarschalkerweerd said the focus was on anticipating what may happen and quickly advising the bank’s clients.

“Risk management is part of our business,” he said.

“Thinking about scenarios is what we do, and we are prepared.”

(Reporting by Jonathan Gould, Kathrin Jones, Alexander Huebner in Frankfurt and Toby Sterling in Amsterdam)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/4laiQrBCCxM/story01.htm