Greece has reached the end of the road and hopes for a deal are quickly vanishing. Greece's stock market has shut down for the week and banks will be closed until Thursday, when they will open only to allow pensioners to withdraw a maximum of 240 euros. Although Greece's stock market is closed, investors can still trade the Greek ETF (NYSEARCA:GREK). It fell 16 percent on Monday, below its closing low for the past 52-weeks.
The euro immediately fell when news of the Greek bank holiday hit the wires, but it subsequently rebounded and recovered nearly all of its losses. U.S. equities opened lower on the news and shares fell over 2 percent on the day. European shares including the German DAX and French CAC 40 were both down more than 2.5 percent. Gold prices were volatile, moving up and down, closing up 0.49 percent. One sector bucking the trend is agricultural commodities. Wheat, corn and soybeans were all higher on Monday.
Greece isn't the only potential sovereign defaulter this week. Puerto Rico has decided to stop paying its bonds. Many high-yield municipal bond funds have shed Puerto Rican bonds as this outcome has been signaled for some time. Market Vectors High-Yield Municipal Index (BATS:HYD) was off by 1.45 percent on the day.
U.S. treasuries are benefiting from the turmoil overseas, but the decline in interest rates isn't yet significant given the gains we've seen over the preceding weeks.
This is a holiday shortened week for the markets, but some important economic data will be released. Construction spending for May and auto sales for June will be out on Wednesday, along with the manufacturing PMI for June. On Thursday, the June unemployment rate and May factory orders will be released. Depending on how events play out in Greece, this data may be overshadowed, but they're likely to provide more evidence of improving economic strength domestically. Overseas PMIs are also due out this week, with China's being of particular importance.
Chinese stocks slid again on Monday. The main board in Shanghai is now down more than 20 percent since peaking a few weeks ago, while the start-up index, similar to the Nasdaq, has corrected more than 30 percent. The People's Bank of China cut interest rates and reserve requirements over the weekend in a bid to staunch the slide and aid the slowing Chinese economy. Although official economic growth may be running just below 7 percent for the quarter, in reality GDP growth is likely much lower. In May, industrial profits were only up 0.6 percent year-over-year.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.