WORLD ECONOMIC & MARKET DEVELOPMENTS
GLOBAL MARKETS: European equity indices opened in the red on Monday, pressured by heightened uncertainty following the Brexit result of the June 23rd UK referendum. In Spain, the IBEX 35 Index opened in the black rising more than 2.0%, after the victory of Mariano Rajoy’s centre-right People’s Party (PP) in repeat general elections in Spain on Sunday, which increased its seats in Parliament to 137 from 123 in December’s inconclusive poll, albeit still short of a majority in the 350-seat Parliament. Nevertheless, the said index reversed earlier gains falling ca. 0.6% at the time of writing. EMU sovereign debt spreads widened sharply across the board, with the 10-yr Greek/Bund and 10-yr Italian/Bund yield spread increasing by 9bps to 878bps and by 3bps to 163bps respectively. In FX markets, the GBP came under renewed pressure, with the GBP/USD plunging to a 31-year low of 1.3188 earlier today. Focus this week centres on the two-day European Council summit in Brussels, where EU leaders are expected to discuss the UK’s decision to leave the EU.
GREECE: According to press reports, the Greek government is working to complete by end-July the remaining items in the context of the first programme review that constitute part of the conditionality for the second review, expected to commence in October 2016. According to data released today by the Bank of Greece, in May 2016 total credit to the domestic private sector was negative at €357 million compared to a negative net flow of €156 million in April 2016 and €146 million in March 2016.
SOUTH EASTERN EUROPE
BULGARIA: The Bulgarian stock market closed modestly lower last week, with earlier gains recorded on positive corporate news and low liquidity having been fully erased on Friday after the UK voted in favor of leaving the EU on the June 23rd referendum.
ROMANIA: As was the case around the globe, the UK referendum set the tone for Romanian markets last week.
SERBIA: The EUR/RSD hit a fresh all time high at 124.20/40 last week on increased domestic euro demand and deteriorating global risk sentiment after the UK vote. Along similar lines, the Public Debt Administration sold less than a planned amount of RSD 20bn of 3-year RSD-denominated T-bonds, raising only RSD 6.55bn on Friday’s auction.