Greece Rejects Austerity

In a startling turn of events, Syriza scored a major victory overnight as the vote tally showed over 61% of Greek voters choosing “no” at the referendum, throwing Europe into disarray as leaders scramble to ring fence economies from contagion. In another stunning move, firebrand Greek Finance Minister Yanis Varoufakis resigned from his ministerial post in an effort to help Tsipras head back to the negotiating table with creditors. The overwhelming vote against austerity and further spending cuts might help Greece finally alleviate the lingering debt problem through haircuts and debt relief. This is a great victory, but throws the situation into chaos with creditors not sure how to respond. Meetings will be conducted throughout today’s market session as policymakers discuss options including parallel currency issuance and further bank financing. The Euro reopened to over 100 pips in losses before recovering overnight, managing to rally back above 1.1000 after experiencing substantial volatility.

Major crude oil benchmarks tumbled below critical support levels, breaking out from a two-month range as fears of contagion coupled with a slowdown in Asia saw renewed pessimism in the oil patch. Brent crude oil fell below $60 per barrel as West Texas Intermediate briefly fell below $55 per barrel before rebounding higher. The spread between the instruments has also narrowed after widening past $5.00 last week, currently trending near $4.70. With the confluence of factors contributing to a market already ignoring equilibrium conditions, the recent slide in prices might be the beginning of the resumption of the prevailing longer-term downtrend. Renewed growth in drill rigs and continued gains in output from the major producers has seen the oversupply claim resurface as OPEC keeps production targets unchanged. Meanwhile natural gas is also trending lower, with the Henry Hub retreating -0.74% to 2.750 per MMbtu.