Recap: How Markets Reacted to the Turmoil in Greece

Markets around the world reacted strongly Monday to the latest twists and turns in the drama playing out in Greece. Stocks tumbled from Hong Kong to London, gold and U.S. Treasurys strengthened as investors looked for safety, and the euro actually rose.

The gyrations came amid news that Greek banks will stay closed for six days, and the country's central bank has moved to impose capital controls, in a bid to prevent a severely battered banking system from collapsing completely.

Over the weekend, Greek Prime Minister Alexis Tsipras shocked European policy makers by announcing the country will hold a referendum on whether to accept the terms of Greece's creditors to unlock desperately needed financial aid.

It now looks almost inevitable that Greece will default on a €1.54 billion ($1.69 billion) payment due to the International Monetary Fund on Tuesday. Much is at stake beyond the IMF's balance sheet. What happens to Greece itself? What happens to the euro, a purportedly unbreakable currency union, and the Continent's attempt to recreate itself as a global economic superpower? What happens in the capital markets, which have feasted on cheap debt and assumed all risks were contained?

Here's how it looked from our front row seat as investors grappled with those questions:

4:38 pm | That's it! | by Erik Holm

More than 14 hours after we started, we can safely say: It was a wild day, and the wildness looks like it’ll keep going all week.

Thanks for joining us.

#Greferendum worst game of chess ever.

— Andrea Tryphonides (@ATryphonides) June 29, 2015

4:33 pm | VIX spikes | by Saumya Vaishampayan

The VIX surged 34% to 18.85, ending at its highest level since Feb. 2. The size of the move was dramatic. Monday’s move was its biggest one-day percentage increase in more than two years, when it jumped 43% on April 15, 2013, according to FactSet.

That one-day increase ranks high on the list of large moves in the last 10 years. Bigger moves include a 50% surge in August 2011 and a 64% leap in February 2007.

4:29 pm | Stocks down on the year | by Kristen Scholer

The S&P 500 is now negative for the year and sits at a three-month low, 3.4% from its May 21 high. Trading volume was heavier than normal Monday, but not off the charts. It looks like 3.7 billion NYSE-listed shares changed hands Monday, above the 2015 daily average of 3.5 billion.

4:18 pm | Selling pressure into the close | by Erik Holm

Stocks ended at or near session lows in most cases. The selling pressure may have been sharpening because of the headlines hitting the tape as Greek PM Alexis Tsipras was speaking on local television and his teams was tweeting simultaneously from his official account.

This is an attempt to block any alternative political view-this is clearly a political choice. The ppl will decide differently. #ert #Greece

— Alexis Tsipras (@tsipras_eu) June 29, 2015

4:14 pm | by Patrick Sullivan

The declines for U.S. stocks were their biggest this year. Materials and financial shares took the biggest hit, while all 30 Dow components end in the red. DJIA drops 350 points to 17596, the S&P 500 falls 43 to 2057 and the Nasdaq takes the biggest hit, sliding 122 to 4958.

Investors move back into haven assets sending the 10-year Treasury yield back down to 2.32%. Markets will remain focused on Greece ahead of the pending debt payment deadline and this weekend's referendum. Though Thursday's release of June payrolls will at least briefly bring focus back to U.S. shores and Fed rate plans.

4:10 pm | No panic | by Erik Holm

Our colleague Justin Lahart writes that the selling in U.S. markets today wasn’t the kind of panicked response often seen in previous rounds of the eurozone’s sovereign debt crisis.

That's reflective of an environment in which the risks of financial contagion seem low, he said.

Greece’s crisis has taken so long to come to a head that foreign exposure to the country’s debt is at this point mostly taken up by public entities like the European Central Bank and the International Monetary Fund. Meanwhile, outside creditors’ exposures to China have always been low.

That is a different environment from what prevailed in periods like 1998, when the exposures of foreign banks and leveraged private investors to Russian debt set off a spiral of losses.

Read more from Justin here.

4:09 pm | U.S. stocks: S&P 500's first 2% drop all year | by Paul Vigna

U.S. stocks closed with their worst one-day losses in several months, although the losses weren’t as sharp as some of the heaviest losses in Europe.

The market broke an uptrend that has been in place since late January, even as most traders seemed to think this was an orderly selloff, and most people seemed to think that a deal will still be struck in Europe. Tomorrow’s trading will be a key to determining just how bad or lasting today’s selloff really will be.

The yield on the U.S. 10-year Treasury note saw its biggest one-day slide since November 2001, finishing at 2.333%.

3:42 pm | Worst day of the year | by Saumya Vaishampayan

Could be the first 2% closing move this year for the S&P 500

— Saumya Vaishampayan (@saumvaish) June 29, 2015

3:36 pm | Tsipras: Greeks will survive without bailout | by Paul Vigna

We’re getting some headlines crossing the Tape right now, comments from Mr. Tsipras.

3:22: Greeks Will Survive Without Bailout Agreement After Tuesday- PM Tsipras

3:25: Germany’s Merkel Said There Will Be Negotiations After The Referendum-Greek PM

3:31: Tsipras Says He Realized Creditors Did Not Want Compromise But Wanted Greek Gov’t to Accept Their Terms

3:32: Creditors Don’t Want Greece Out Of The Euro – Greek PM

3:32: The Cost Of A ‘Grexit’ For Europe Will Be Huge – PM Tsipras

Stocks keep falling. Dow’s off 320 points, S&P 500 is off 40.

3:36 pm | Amid the turmoil, the euro actually strengthened | by James Ramage

Investors bought the euro on Monday, exiting bets in European equities that had involved selling the common currency, even amid growing concerns that the latest developments in the Greek debt crisis would send the currency lower.

The euro recovered from a selloff during the Asian session that had plunged it to a three-week low against the buck to trade 0.7% higher by early afternoon in New York, at $1.1244.

On Monday, investors outside Europe continued to exit positions in eurozone equities and buy back euros they had previously sold to shield their stock picks from adverse currency moves, said David Woo, head of global rates and currencies research at Bank of America Merrill Lynch.

“If European stock markets go down, investors don’t want to be over-hedged and don’t want the currency risk,” Mr. Woo said. “The markets have been seeing a negative relationship between European equities and the euro for a while. I’m not certain of the direction of causality between these two things, but this is clearly a factor.”

In addition, investors continue to close out those bets that involve borrowing the low-yielding euro and selling it to fund trades for riskier, higher-yielding emerging-market currencies. Exiting the popular trades involves purchasing the euro, investors say.

For more on how Monday’s moves highlight the degree to which investors are struggling to interpret how world events will affect currencies, click here.

3:20 pm | Dow off 300 points now | by Paul Vigna

The DJIA has hit another fresh session low, off more than 300 points.

The Dow fell as much 309 points, or 1.7%, to 17638. It will be interesting to see if the appearance of a "three-handle" brings in buyers, and if so, how many.

3:10 pm | Technical levels in focus amid Greece turmoil | by Kevin Kingsbury

As U.S. stocks setting fresh session lows as the afternoon progresses, the Dow Jones Industrial Average and S&P 500 have reached the first of what could be several key levels for the indexes

Trading has been extraordinarily tight this quarter, with the Dow and S&P moving within roughly 3% intraday ranges of 17700-18300 and 2070-2130, respectively.

Currently down some 1.7% at 17650 and 2064, closing at those levels would bring into play a potential near-term test of March's intraday lows of 17580 and 2040, followed by the bottom of the ranges dating to last fall of 17000 and 2000, respectively. Break those round numbers and a bumpy ride is in store, potentially even a run at correction territory, a place unvisited by the indexes since 2011.

And with this holiday-shortened week getting off on the wrong foot for bulls, perhaps the S&P 500 might finish more than 1% from Friday’s close. That might sound like no big deal, but lately it has been. Last week was the ninth straight that the index didn’t notch a 1% move on a weekly basis—the longest such run since the 12-week stretch logged in mid-1993, says Wells Fargo.

"With the jobs number scheduled for release as well, we suspect investors should prepare for a risk-off, volatile trade," it adds. Wells, though, still ultimately expects a deal between Greece and its creditors.

2:57 pm | Gold edges higher | by Tatyana Shumsky

Gold prices climbed to a one-week high on Monday as some investors bought gold as hedge against a potential Greek debt default. But it didn’t make a huge move on the news.

The most actively traded contract, for August delivery, rose $5.80, or 0.5%, to $1,179.00 a troy ounce on the Comex division of the New York Mercantile Exchange.

“Gold was the beneficiary of today’s events, but prices didn’t exactly rocket higher,” said Bill O’Neill, a co-founder of commodities investment firm Logic Advisors.

While the Greek debt crisis should help gold, Monday’s performance was ”mediocre” and underscores long-running concerns about higher interest rates in the U.S., Mr. O’Neill said.

2:54 pm | Grexit would be "a huge deflationary shock" | by Min Zeng

A no vote in Greece’s referendum Sunday could set the country on course to exit the eurozone, say some money managers. Invesco portfolio manager Mark Nash says a Greece departure “would be a huge deflationary shock to the eurozone” and weaken the growth outlook–thus generating repercussions in global economy. That includes the Fed possibly delaying its 1st rate increase until 2016, which would send Treasury yields falling.

2:31 pm | U.S. session turning in its worst performance in months | by Paul Vigna

U.S. stock traders are doing their bit to help bolster the Greek case.

The DJIA fell to a fresh session low, off about 286 (1.6%) at 17661. The S&P 500 is off 35 points (1.7%) at 2066.

If the numbers hold at those levels, it would be the worst one-day selloff since the S&P lose 1.5% back on March 25. If the S&P gets below 2050, all those whistling-past-the-graveyard comments about an orderly selloff might start disappearing.

2:25 pm | S&P cuts Greek debt rating | by Erik Holm

Standard & Poor’s is now weighing in on the situation in Greece, cutting its long-term sovereign credit ratings on the country to “CCC-” from “CCC.” It says the decision to hold a referendum is “further indication that the Tsipras government will prioritize domestic politics over financial and economic stability, commercial debt payments, and eurozone membership.”

The ratings firm writes that it now seems as if “the government appears willing to accept the consequences on its banking sector and economy from the failure to reach an agreement” and puts the odds at Greece exiting the eurozone at 50%.

Barring an unforeseen favorable development, S&P says, Greece “will likely default on its commercial debt during the next six months.”

And the ratings firm paints a picture of just how dependent Greece's financial system has been on eurozone support:

At present, the Eurosystem's support to Greek banks--directly through the ECB's main refinancing operations and indirectly via the Bank of Greece's Emergency Liquidity Assistance (ELA)--exceeds 70% of GDP, according to our estimates. Without it, Greece's payment system would shut down and its banks would not be able to operate.

2:10 pm | 10 reasons not to worry...much | by Kristen Scholer

BMO Capital Markets lists 10 reasons it thinks investors shouldn’t fear Greece…much:

Even though the firm believes there are reasons not to worry too much, it still says the latest drama “brings the euro crisis to a new dangerous phase.”

2:07 pm | China wants Greece to reach a bailout deal too | by Gabriele Steinhauser and Naftali Bendavid

China's prime minister on Monday urged Greece's creditors to seal a deal soon on a bailout for the Athens government.

"China wants Greece to stay in the eurozone and we urge the relevant creditors to reach an agreement," said Li Keqiang in a news conference here after a meeting with the heads of European Union institutions.

Mr. Li--whose country has made major investments in Greece, including in government bonds and the famous port of Piraeus--said Greece's future in Europe's currency union is also a matter of importance for China.

"Whether Greece would stay in the eurozone is not a question that only concerns Europe, but also a question which concerns China and Europe," he said.

In the same news conference, Donald Tusk, who presides over the summits of EU leaders, rejected a claim by Greek Prime Minister Alexis Tsipras that a "no" vote in Sunday's referendum on the rescue plan would strengthen his position in the talks with creditors.

"If someone says the government will have a stronger negotiation position with a 'no' vote it is simply not true," said Mr. Tusk. "I'm afraid with such a result there will be even less room for negotiation."

2:05 pm | "The Situation" | by Pedro da Costa

Tragic: #Greece bank manager explains 'the situation' to distraught retirees (photo by Yannis Behrakis) #EuroCrisis pic.twitter.com/rqMUw0ym57

— Pedro da Costa (@pdacosta) June 29, 2015

2:02 pm | G-7 countries are seeking assurance from Europe | by Ian Talley

Top eurozone finance officials sought to reassure their G-7 counterparts, who are worried that Greece’s deteriorating financial crisis risks fomenting market turmoil and derailing a weak global recovery.

Japanese Finance Minister Taro Aso said the eurozone had promised to its G-7 partners that it would do whatever it takes to stabilize the financial markets.

A G-7 diplomat said on Monday the group welcomed “the decision taken by euro area ministers…to make full use of the instruments available to safeguard the stability and integrity of the eurozone.” Those efforts “will complement any actions the European Central Bank may take in full independence, in line with its mandate,” the official said.

U.S. Treasury Secretary Jacob Lew urged German, French and Greek authorities over the weekend to continue to seek a bailout deal, warning that the global economy was at risk from an escalation in the crisis.

Mr. Lew has repeatedly cautioned against being overly sanguine about the potential fallout from the crisis worsening.

A European Union official said G-7 officials are staying in close contact, monitoring market developments and are prepared to issue an official joint statement to help calm investor fears if market turbulence escalates around the world.

“While the impact on markets is not good, it’s not as bad as one might have feared,” the E.U. official said. An official statement might foment anxiety at this point, he said.

Meanwhile, European officials are finalizing contingency plans for a potential Greek default or eurozone exit, the official said.

2:01 pm

This pro-government (i.e. #Greferendum NO vote) protest happening now in front of the Greek parliament in Athens pic.twitter.com/1Dz7dUTro3

— Erik Schatzker (@ErikSchatzker) June 29, 2015

1:35 pm | Why Greece won't be allowed to leave the euro | by Paul Vigna

Greece won’t leave the euro and the currency will survive, Stifel Nicolaus managing director Barry Bannister writes in a thorough take on crisis. But that conclusion will come only after a walk at the edge of the abyss.

“I doubt Greece will be allowed to leave,” he said, "because leaving the poorly constructed euro…would be the best thing that ever happened to Greece and the worst thing that could ever happen to the European Central Bank.”

For the Achaeans, default and exit from the euro would “probably allow Greece to grow.” He reckons 75% of its economy is domestic and wouldn’t be affected by access to outside credit. The remaining 25% is mainly tourism and would benefit from a cheap currency (which he assumes would be a new drachma).

But the ECB, he says, “cannot afford the hit to its credibility and the great unwind of its raison d’etre, which is the euro.” After Greece, he says, Portugal’s debt are probably unsustainable, Spanish banks need tax credits for capital, Italy has unsustainable debt, too, and France has long-term fiscal problems, “to name just a few maladies.”

Beyond that, even the Greeks will most likely vote to stay in the euro he says. The poor get access to the EU’s social welfare platform and the rich get a more stable currency for their wealth. So, he thinks, ultimately the euro will survive, albeit with debt write-offs.

“Those in core Europe and successors who made loans to Greece need to learn that a fool and his money are soon parted,” he said.

1:34 pm | Tourists caught too | by Erik Holm

Thousands of foreign visitors here are caught in a liquidity crunch after Greece’s bailout talks broke down. While they aren’t subject to the same withdrawal limits as the locals, even finding an ATM that’s still stocked with euros is posing a challenge. And one New Yorker told the Journal’s Costas Paris that it didn’t quite feel right to be shopping for big-ticket items amid the turmoil.

1:25 pm | Drug makers urge a plan | by Denise Roland

Drug makers are urging Brussels to work with them to make “concrete contingency plans” amid the threat of a Greek exit from the eurozone.

In a letter sent Monday to European Commissioner for Health Vytenis Andriukaitis, seen by The Wall Street Journal, the head of the European Federation of Pharmaceutical Industries and Associations made an urgent request for a discussion on measures to protect the availability of medicines in the event of an exit.

Richard Bergström, director general of the organization, which represents 39 multinational pharmaceutical companies, said a Greek exit could disrupt the country’s “complicated” medicines supply chain, which is much more fragmented than in other European Union countries and involved several hundred wholesalers.

More on the threat to drug makers here.

1:14 pm | Tusk reacts | by Erik Holm

On #Greece: every government has the right to hold a referendum. However, NO vote will not will not result in stronger negotiating position.

— Donald Tusk (@eucopresident) June 29, 2015

Hitting the wire now: headlines with reaction from European Council President Donald Tusk.

EU Tusk: “Simply not true” Greece will have stronger negotiation position with no vote

EU Tusk: No vote would actually mean “less space for negotiations”

1:07 pm | Kerry's "fulsome discussion" | by Erik Holm

The Journal’s Laurence Norman is reporting that John Kerry had a “fulsome discussion” of where things stand in Greece with his German counterpart:

U.S. Secretary of State John Kerry discussed the crisis in Greece with his German counterpart, Frank-Walter Steinmeier, at a dinner Sunday evening, including talking about “what else could be done,” a senior U.S. official said.

The official said Monday that Mr. Kerry, Mr. Steinmeier and other senior diplomats held a “fulsome discussion of where things stood” as news came in about the latest developments in Athens.

The discussion took place in Vienna on the sidelines of the Iranian nuclear talks.

1:04 pm | Shedding risk on Grexit fears | by Min Zeng

Dialing back exposure to riskier assets is a theme for many money managers due to the Greece uncertainty. Mark Nash, portfolio manager at Invesco, tells the Journal today that he has reduced holdings of eurozone's periphery bonds over the past week. And since the weekend, he has cut holdings of government bonds in Italy and Cyprus further. He has slashed Greek bond holdings, now accounting for just 0.1% of his portfolios.

"The risk of Grexit has increased markedly following the weekend events," he says. "Haven bonds will do very well" if Greece's debt crisis continues to deteriorate. He has allocated more cash into German bunds and Treasurys, seeing the recent selloff in Treasurys as a buying opportunity.

12:46 pm | Tuesday looms large | by Erik Holm

Our colleague Nektaria Stamouli is now reporting:

Greece won’t make a debt repayment to the International Monetary Fund due Tuesday, a senior Greek government official said Monday.

Earlier this month, Greece had notified the IMF it plans to bundle its loan repayments falling due this month into one payment of around 1.6 billion euros ($1.7 billion), which is due Tuesday.

The IMF has said that Greece will immediately be in arrears if it fails to make the debt repayment.

12:42 pm | East European banks scramble to stem contagion fears | by Georgi Kantchev

As Greece faced shuttered banks and capital controls on Monday, the country’s nearest neighbors were scrambling to allay fears of contagion.

Central bankers in Eastern European countries with extensive links to Greece took steps to ease concerns among investors and depositors that the Greek debt crisis could hurt their fragile economies.

However, in Bulgaria, the poorest country in the European Union, the prime minister said the fallout in Greece could derail the country’s long-standing plans to join the eurozone. Greek-owned banks control more than a fifth of the country’s banking assets.

Greek banks are also active in other Balkan states, including Macedonia, Romania, Albania and Serbia.

12:39 pm | European companies brace for fallout | by Erik Holm

European companies and industries braced for fallout from the closure of banks across Greece, but many firms and trade groups said that the small size of the country’s economy and their own limited exposure meant there likely wouldn’t be a dramatic impact on business.

We’ve rounded up some of their reactions here.

12:19 pm | ETF still struggling | by Erik Holm

Meanwhile, the Greek ETF we told you about is still off about 16%. The stock market is closed in Athens but investors are taking out their frustrations on the ETF, called the Global X FTSE Greece 20. So far, more than 3.5 million shares have traded hands today, well above this average over the last 90 trading days of 955,770. The only day this year with heavier volume was Feb.20, when the ETF jumped 10% as Greece got an extension on its bailout.

12:15 pm | by WSJ Staff

Greece won't pay IMF tranche due Tuesday, government official says http://t.co/xnCG6c6baX

— WSJ Breaking News (@WSJbreakingnews) June 29, 2015

12:07 pm | S&P 500 on the technical ropes | by Paul Vigna

The index to keep an eye on in the U.S., as it often is, is the S&P 500, which is sitting near some key levels.

The index has been riding in a tight channel for months now, roughly between 2080 and 2120. Moves to the bottom of that channel have sparked rallies, moves to the top have been sold off. It's been like clockwork, but what it's really pointed to is indecision. The market's been waiting for something decisive, out of the Fed or out of Europe. Decisive may finally be coming.

"The (S&P 500) is currently right on the uptrend line from the March low (barely hanging onto that channel)," said Frank Cappelleri, the and executive director and market technician at Instinet. It's also holding onto a series of higher lows. For that to remain in effect, he said, the index needs to close above its June 15 intraday low of 2072.

Monday's low - so far - is 2075.76.

11:55 am | U.S. stocks hit session lows | by Paul Vigna

In the wake of the European close, U.S. stocks have taken another leg down, with the major indexes sinking to fresh session lows.

The DJIA is off 213 points, or 1.2%, at 17733. The S&P 500 is off 25 points, also 1.2%, at 2077. This is below the 2080 level that's been a support for the market in recent months. A material breach here would be significant.

The Nasdaq Composite is down 1.4% at 5011.

As before, financials are taking the worst of the selloff, down 1.5% as a group. E*Trade is off 3.9%, Charles Schwab is down 3.6%. Bank of America is down 2.5%, Citigroup is off 2%, and JP Morgan is down 1.6%.

11:50 am | S&P using Friday's Greek stock quotes for its indexes | by Paul Vigna

In case you were wondering how S&P Dow Jones Indices would deal with having Greek stock exchanges shut down, the firm released this statement today:

“S&P DJI will carry Greek stocks at the Friday, June 26th close or last traded price if there is no official closing price. This decision is in line with S&P DJI’s published Equity Index Policy and Procedures document.

“The S&P DJI Global Index Committee will continue to monitor the situation in Greece closely, and will issue public statements as appropriate.”

11:42 am | So, what's the damage for Europe today? | by Josie Cox

We’ve made it through a pretty messy day in European markets. So what’s the damage?

The Stoxx Europe 600 ended the session 2.7% lower. According to FactSet data that’s its biggest single-day loss so far this year.

Germany’s DAX is off 3.6%, France’s CAC-40 is 3.7% lower, Spain’s IBEX is down 4.6% and Italy’s MIB 5.2% lower. Beyond the euro area, the FTSE 100 ended the day down 1.8%.

Bond markets are also still under pressure. The yield on the Greek two-year bond is at 34.4% –that’s more than 14 percentage points higher on the day. The 10-year yield is at 14.7%, very close to its highest level since December 2012.

The euro, meanwhile, has bounced back having fallen to a more than three-week low against the buck in Asia’s session Monday. It’s currently around 0.2% higher against the U.S. dollar at just over $1.118.

Buckle up for more excitement in Europe tomorrow, when Greece faces a €1.54 billion ($1.69 billion) payment deadline to the International Monetary Fund. And let’s see how the day plays out in the U.S. (Photo: Reuters)

11:42 am | What are the instruments available to the ECB? | by Cynthia Lin

The ECB over the weekend said it's "determined to use all the instruments available within its mandate" to protect the eurozone against Greece's looming default. What are they?

Policy research firm Cornerstone Macro points to a few options. The ECB could accelerate quantitative easing program, buying the planned EUR1.1 trillion in bonds sooner than its current September 2016 timetable. It could support banks with more liquidity, either by conducting unconditional long-term financing operations as it did in 2011 and 2012 or reducing margin requirements on collateral offered by banks.

What would get the ECB to act? Cornerstone says it'd have to see a dislocation in bonds, not just stocks.

11:39 am | The VIX isn't showing signs of panic | by Saumya Vaishampayan

The CBOE Volatility Index, or VIX, keeps climbing as stocks fall. The VIX is now up 22% at 17.04, and a close at that level would mark the highest since Feb. 10. Still, as several market participants have noted, the VIX is rising from very low levels. The VIX closed Tuesday at 12.11, tied for 2015's nadir after earlier getting to 11.93 intraday. Even with today's advance, a VIX at 17 is nowhere near a "panic area," says Michael Palmer, a VIX specialist at Group One Trading.

11:32 am | Eurozone critics step forward: 'Brutal power politics' | by WSJ Staff

With Greece on the brink of leaving the eurozone and global financial markets selling off on that prospect, the line of academics ready to criticize eurozone leaders is out the door.

The Journal’s Paul Hannon writes that the European Central Bank’s decision not to expand the emergency liquidity assistance given to Greek banks came in for particularly harsh criticism.

The most stinging attack on the ECB came from Charles Wyplosz, professor of international economics at the Graduate Institute, Geneva and a respected commentator on eurozone economic policy. In a posting on the VoxEU blog run by the Centre for Economic Policy Research, Mr. Wyplosz argued the ECB had acted from political motives, and not for the first time.

“No other central bank in the world tells its government what reforms it should conduct, nor how sharp should fiscal consolidating be,” he wrote.

Mr. Wyplosz argued that one of the ECB’s key roles is to act as a lender of last resort to the eurozone’s banks, and in failing to do that it was “pushing Greece out of the eurozone.”

“Politicians may debate about the wisdom of making Greece leave,” he wrote. “As non-elected officials, the people who sit on the Governing Board of the Eurosystem have no such mandate.”

Writing for Foreign Policy, the London School of Economics’ Philippe Legrain also saw the ECB’s decision as a “political move” in the service of “brutal power politics” that seeks to bypass democracy.

“There is a chance that a resounding No vote in the referendum will bring the creditors to their senses,” Mr. Legrain wrote. “But if it doesn’t, default on the 3.5 billion euros due to the ECB on July 20 and leaving the euro is better than debt bondage.”

Read more on this topic here.

11:24 am | A Grexit might look like Lithuania's break from the Soviet Union | by Chiara Albanese

Remember Lithuania's break from the Soviet Union? Nordea draws a parallel with Greece.

The first step towards ‘grexit’ would be the introduction of capital controls in the country, which is already taking place. “Next Greece will have to introduce some temporary currency, IOUs, which will be trading at a discount,” says Aurelija Augulyte at the bank. We have seen this happening already, in Lithuania for example.

“After the collapse of the Soviet Union in 1990s we had temporary vouchers, they circulated alongside ruble and gradually replaced them.” The vouchers only were replaced by “litas”, the new currency, in 1993, once the monetary reform took place.

11:16 am | Italian Prime Minister Matteo Renzi weighs in | by Giada Zampano

The point is: greek referendum won’t be a derby EU Commission vs Tsipras, but euro vs dracma. This is the choice.

— Matteo Renzi (@matteorenzi) June 29, 2015

11:12 am | Will Greece's problems be contained? | by Kristen Scholer

The possibility of a Greek default has confronted investors on and off over the past few years. As Greece's problems intensify before the country is poised to miss a debt payment Tuesday, Citigroup Inc. Private Bank global chief investment strategist Steven Wieting says Europe is in a better position to handle the situation this time around.

"For global investors outside of Greece, it is important to understand how much better positioned the Eurozone now is to handle a Greek shock compared to when Greece's debt was first restructured in 2011," Mr. Wieting said. "We continue to believe the potential financial overspill to the rest of the Eurozone and to the wider world is much less than in prior years and can be contained."

Mr. Wieting thinks that, in order to limit financial contagion, the European Central Bank could speed up purchases of euro periphery debt and provide liquidity assistance to any financial institutions outside of Greece that are directly affected by contagion fears.

11:01 am | Who's zooming who? | by Paul Vigna

While the markets are looking at leaders in Greece and Europe for direction, the eurocrats are likely looking right back at the markets.

We've seen this numerous times since the Panic of 2008. Some leader, somewhere, makes a decision. The markets react. If the market tanks, the leader tends to back off, if the market doesn't tank, the leader is emboldened. The "taper tantrum" of 2013 - when Fed chairman Ben Bernanke first talked about raising rates, only to back off after a massive convulsion in the markets - is the classic example of this.

That dynamic may play out again with Greece this week, because in this game of chicken, the market reaction is critical. A massive selloff would likely pressure Brussels to cave to Greek demands. A moderate, controlled selloff, what we're seeing so far, gives the upper hand back to Brussels.

"Tsipras needed markets to destabilize to put pressure on Brussels," UBS's Art Cashin wrote in a morning note. "But, if markets stay contained, it could backfire."

10:59 am | German companies sanguine over Greek trade | by Ulrike Dauer

German exporters and importers don’t fear any significant business impact from current developments in Greece, says Anton Boerner, president of the German BGA wholesale and foreign trade association. Greece only accounts for a small portion of Germany’s trade, and German companies have already dealt with the Greek crisis for the past six years, so there shouldn’t be any unpaid bills on a large scale, Mr. Boerner said. In 2014, Germany exported goods worth EUR4.96 billion to Greece and imported goods worth EUR1.73 billion from Greece, according to data by Statista database.

10:56 am | Gold rises on Greek fears...somewhat | by Tatyana Shumsky

Gold prices rose Monday as investors flocked to the precious metal to protect their wealth against the risks of a potential default in Greece. But the gains were rather muted.

The most actively traded contract, for August delivery, was recently up $2.20, or 0.2%, at $1,175.40 a troy ounce on the Comex division of the New York Mercantile Exchange.

“The Greek news, while it’s bad, is not a surprise ... a lot of this news is built into the market,” said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago.

There's more on how gold is reacting to the Greece news here.

10:52 am | Coming off the lows | by Phillipa Leighton-Jones

Want to catch up with the European moves before the markets close? Here are the big five charts to watch, which shows some calm returning after this morning's sharp moves.

10:49 am | A new bailout program? | by Phillipa Leighton-Jones

This from our Brussels colleagues Gabriele Steinhauser and Viktoria Dendrinou:

Greece would be able to apply for a new bailout after the existing one expires, but most of the measures demanded by creditors would be part of any new aid program, European Union officials said Monday.

EU officials said that an application for new aid from the eurozone bailout fund would require new negotiation of the terms of the aid, but stressed that there would likely be "substantive carry-over" of the overhauls currently demanded.

10:47 am | “You shouldn’t commit suicide because you’re afraid of dying" | by WSJ Staff

European leaders appealed to the Greek people Monday to vote “yes” in a referendum on its international bailout, warning that the risk of a rupture of their currency union was real.

“You shouldn’t commit suicide because you’re afraid of dying,” Jean-Claude Juncker, the president of the European Commission, said in a speech aimed at convincing Greeks that the budget cuts and policy overhauls their government has rejected are actually good for their country.

Read more about what European leaders are saying here.

10:46 am | Greece's impact on liftoff | by Kristen Scholer

For market participants wondering when the Federal Reserve is going to raise interest rates, it’s natural to ask: How will Greece’s debt debacle affect liftoff?

In Fed Chair Janet Yellen’s press conference June 17, she said: “To the extent that there are impacts on the euro-area economy or on global financial markets, there would undoubtedly be spillovers to the United States that would affect our outlook.”

Less international demand and a higher U.S. dollar could crimp America’s growth, leading the Fed to keep rates lower for longer. Already Greece’s debt woes are driving down the value of the euro versus the dollar and that could continue if the European country fails to reach an agreement with its creditors. A higher greenback eats into earnings abroad and weighs on exports, adversely affecting the trade component of U.S. GDP growth.

The Fed has maintained that its decision to raise rates will be data dependent. So the U.S. would need to show it’s immune to Greece’s turmoil before the central bank gives the green light to raise borrowing costs.

If rates remain near zero because of worries about Greece, that would be a tailwind for U.S. stocks.

10:46 am | Not another Lehman moment, Rosenberg says | by Paul Vigna

So far, and those are not idle words at this point, the capital markets are taking the Greece crisis pretty well in stride. Yes, markets are red across the globe, but given that we live in a flash-crash high-frequency trading world, it could be much worse if the markets were truly panicking.

There are so many moving parts here, but for the market it can really be boiled down to one overarching concern: contagion. Is Greece’s crisis the equivalent of Lehman Brothers crisis in 2008, a collapse of a highly interconnected player that led to a collapse of the broader infrastructure? For the market, that is the real fear, and judging from the trading today, they aren’t too worried about that. Gluskin Sheff’s chief economist David Rosenberg thinks he know why that is.

“The ECB has so many strategies to limit the damage that there is no reason to expect a domino effect,” he writes, “and given how concentrated Greek debt is on the balance sheets of taxpayer supported entities (as opposed to commercial or investment banks), the answer is ‘no,’ this is not another Lehman moment. No doubt this week we will have market turbulence and a brief flight-to-safety bid, but perhaps in the end both Greece and the rest of the European Monetary Union will be better off with a different arrangement.”

10:40 am | Investors who went to Europe getting fast lesson | by Saumya Vaishampayan

Earlier this year, investors pulled money out of U.S. stocks and put it in European equities, where the potential for gains was seen as being greater as the ECB embarked on its version of QE.

"Investors who started tiptoeing over there...have been forewarned that it is not smooth sailing," says Diane Jaffee, a portfolio manager at TCW. The latest developments in Greece could possibly spur inflows back into U.S. stocks. The Dow and S&P are both off 0.9% today, less than the declines seen in Europe.

10:38 am | Market reaction is "surprisingly restrained" | by WSJ Staff

Greece Challenges But Doesn’t Break Market Mood: my take on Monday for Heard: http://t.co/ledbD5Ri2R via @WSJ

— Richard Barley (@RichardBarley1) June 29, 2015

Our colleague Richard Barley of the Journal’s Heard on the Street is calling the market reaction to the Greek news “surprisingly restrained.”

Investors, he writes, “appear to be putting faith in the ability of the eurozone to manage the fallout from the Greek crisis.”

10:33 am | Russell Investments still keen on Eurozone equities, peripheral bonds | by Emese Bartha

The situation in Greece may have deteriorated over the weekend, but Russell Investments maintains its current overweight positions in eurozone equity and peripheral bonds, without adding to these positions. That said, it changes the probabilities attached to the different scenarios to reflect recent events. The firm sees only a 10% chance that a deal is struck and the can is kicked once again, down from 50%. Sees a 60% chance no deal is struck, Greece defaults on some of its debt, imposes capital controls but stays within the eurozone. Finally, the firm sees 30% chance no deal is struck, Greece defaults, the ECB retracts ELA support forcing the Greek government to institute capital controls and issue IOUs, starting the process of a eurozone exit. It’s advising investors to keep a close eye on the ECB as it plays a pivotal role in the whole investment environment.

10:32 am | Greece is the word? | by Kristen Scholer

The S&P 500 is down Monday as jitters about a Greek default hit markets. Even so, the loss is only fractional. Other factors such as the Federal Reserve's liftoff date and corporate earnings remain in focus for stocks.

"That fact is that Greece really isn’t the word," said Dan Wiener, chairman and CEO of Adviser Investments. "The word(s) are earnings and interest rates because when all is said and done, stock prices move on earnings and interest rates—not on the issues affecting a tiny country in Europe."

10:22 am | What to look for as Greece votes | by WSJ Staff

Greece last held a national referendum more than 40 years ago, in 1974 , when voters were asked to decide on the abolition of the monarchy. Our primer on what to look for when the country votes on July 5 on its future is here. (Photo: Reuters)

10:17 am | Banks are hardest hit in U.S. trading | by Paul Vigna

U.S. stocks are coming off their initial lows, with the S&P 500 now off 15 points, at 2086. The index had traded as low as 2082.

The worst sector on the day so far, as you'd expect, is financials, down about 1.1%. For what it's worth , energy, tech, and consumer discretionary - all off about 0.8% - are following up.

Interestingly enough, within financials, the worst losers are not the big, multinational banks, but the discount brokers. Charles Schwab Corp. is off 2.7%, and E*Trade Financial Corp. is off 2.3%.

J.P. Morgan Chase & Co. is off 1.8%, Citigroup Inc. is off 1.7%, and Bank of America Inc. is also off 1.7%.

10:17 am | OppenheimerFunds doesn't expect a Grexit | by Josie Cox

“While there is a lot of blame to go around, and it didn’t have to come to this, I still believe that Greece will choose to remain a part of the eurozone,” says Krishna Memani, chief investment officer at OppenheimerFunds, which manages over $200 billion in assets. “There will be volatility in markets in the coming days but I believe that the global economy and the global financial system are in much better positions to deal with it today than at any point since 2009.”

10:14 am | Investors risk averse | by Kristen Scholer

Investors are seeking less-risky assets in Monday trade as Greece worries ripple across the globe. U.S. stocks are lower as investors buy bonds, which are considered safe havens. The U.S. 10-year Treasury yield, which moves inversely to bond prices, is at 2.4%, 3.9% below its June high of 2.5%.

As market interest rates fall, rate-sensitive stock groups are benefiting. The S&P 500 Utilities sector, for one, is up 0.6%. Telecoms are fractionally higher too while the other eight sectors are lower. Rate-sensitive stocks are attractive amid low rates because they can offer greater yields than some bonds.

10:13 am | Forex investors are ducking for cover | by James Ramage

Many forex investors left their offices Friday thinking a deal between Greece and its creditors would be settled over the weekend, or at least that negotiations would move closer in that direction. Instead, Greek PM Tsipras ramped up the drama, calling for a referendum and closing Greek banks, sending investors looking for protection, says Brad Bechtel of Jefferies FX Group. Investors sought options that would protect them if the euro tanked, and bought haven assets such as the yen and the Swiss franc, he says.

"The market is getting its head around the idea that Greece is walled off and the ECB has the tools to keep the effects contained," Bechtel says.

The euro down 0.2% to $1.1146 after sinking as low as $1.095 overnight.

10:10 am | Where European markets are now | by Josie Cox

So, where are European markets now?

Well, just over an hour from the close, Italy and Spain continue to lead the losses, down 3.32% and 3.19% respectively. The Dax is down 2.19%, the FTSE 100 down 1.03%. No major equities market in Europe is in the green.

Germany’s 10-year bond yields are now down to 0.83%, down 0.07% on the day. Greece’s 10-year bond yield is over 3 percentage points higher at 14.38%, while Ireland’s and Italy’s are also higher.

The euro has recovered much of the ground lost in Asian trading this morning, and is down 0.21% on the day at $1.114.

In terms of sectors, European financial stocks are particularly feeling the heat. The Stoxx Europe 600 sub-index of bank shares is down 3.2%. By contrast, the broad Stoxx Europe 600 is 1.9% lower. Banco Comercial Potuguese is the biggest loser, tumbling 10.2%. Shares in other Italian, Spanish and Portuguese banks are also all comfortably in the red. Deutsche Bank shares are down 4.8%, Societe Generale shares 4.5% lower and Commerzbank shares are 4.3% lower. (Photo: Reuters)

9:52 am | The markets forget, eventually | by Paul Vigna

Dennis Gartman, who edits and publishes the daily Gartman Letter out of Virginia in the U.S, will not be voting in Greece’s referendum on July 5. But if he were, there’s little doubt which way he’d vote:

“Long ago we said and have repeated many times since that were we at the helm of the Greek government we would have taken Greece out of the euro zone and out of the single currency long ago, for history has shown that defaults are forgiven and forgotten and that devalued currencies restore health far more often to domestic industries than they create in the form of other problems.

“If we’ve learned anything in more than four decades in the capital markets we’ve learned that nothing is forever. Mexico devalued and was allowed to return to the capital markets within months. Russia defaulted and it is now a fully fledged participant in the global capital market. Argentina has defaulted too many times to count, and will again, but it it will be re-admitted to the markets within months…perhaps even weeks…of so doing.”

9:45 am | Sweden weighs in | by Anna Molin

Sweden, a long-time advocate of financial checks-and-balances, said it was unimpressed by Athen’s decision to surprise creditors and European leaders with a referendum, adding that Greece needs to make sacrifices to get its finances in order.

Speaking on public radio on Monday, Swedish Prime Minister Stefan Löfven said a number of countries, including Sweden in the middle of the 1990s and the Baltic countries in the late 2000s, have gone through difficult periods and been forced to adopt austerity measures to right their economies.

“At this late hour for Greece to say it wants a referendum and on top of it, we think the people should vote no, it doesn’t impress me,” Mr. Löfven said. “In the end, it’s up to each member state to make sure its finances are in order. … You can’t escape without making your own sacrifices.”

9:38 am | Is a correction near? | by Kristen Scholer

With Monday's pullback, the S&P 500 is 2.1% from its record reached May 21. The large-cap index is down 0.8% in early trade, on track for its worst percentage loss since June 4.

Worries about a Greek default have investors questioning whether the debt drama will be severe enough to trigger a correction in U.S. stocks after they've gone about four years without seeing a drop of 10% or more -- what is technically considered a correction.

"If this Drachma-drama triggers a market decline in excess of 10%, not seen since October 2011, it may be a blessing in disguise," said Mr. Stovall. "As history has shown, prior market shocks have usually proven to be better opportunities to buy than bail, primarily because the events did not dramatically alter the course of global economic growth."

9:28 am | Greek default 'most anticipated of unanticipated' events | by Kristen Scholer

For roughly half a decade, markets have seen the Greek debt drama unfold. That’s why Sam Stovall, U.S. equity strategist at S&P Capital IQ, says a Greek default would probably be “one of the most anticipated of unanticipated events in modern history.”

The big questions for investors are: 1) What happens next? Does the country actually default?, and 2) How could a default affect the rest of the world?

Mr. Stovall points out that Greece accounts for less than 2% of the EU’s GDP growth. “By itself, its default or exit won’t upend the EU,” he said. “Obviously, the great uncertainty surrounds what happens next to the other peripheral countries with oppressive debt obligations. No one knows for sure.”

9:27 am | Grexit fears stall U.S. bond-market selloff | by Min Zeng

Grexit fears have stalled the U.S. bond market's selloff. While the selloff in global markets have been moderate compared to 2012, traders say the biggest risk is the unknown--the ripples from a Greek default.

"I don't think there is panic in the markets yet, but if this uncertainty continues for a few weeks then 10-year [U.S.] yields could potentially take a run back at 2%," says Anthony Cronin, a Treasury bond trader at Societe Generale. He says if Greece's debt crisis "really starts to hurt the European economy," then Treasury bonds will be well supported as "it would put the Fed on hold" for longer from raising rates.

The 10-year Treasury yield was 2.353% recently vs 2.48% Friday.

9:24 am | Coca-Cola Hellenic 'monitoring' | by Denise Roland

Coca-Cola Hellenic Bottling Company says it is “difficult to foresee how the Greek consumer will be impacted” by the debt crisis but that it is monitoring developments closely. “At this point, there are several potential outcomes,” said a company spokesman. The FTSE 100 group, one of the world’s biggest bottlers of products of the Coca-Cola Company, makes around 5% of its sales volumes in Greece. (Photo: Bloomberg News)

9:18 am | For traders, not just risk, but how much risk? | by Paul Vigna

The trade today isn't going to be necessarily a flat-out risk-on/risk-off trade, but rather a "how much risk" trade. None of this is black and white, and every development will have myriad ramifications. There is a lot of time between now and July 5, and there's going to be a lot of weighing-in for traders, all in real time no less.

U.S. stocks have come off their overnight lows, albeit they are still down sharply, and you can almost see the calculations being made.

"Markets move off the initial extremes as traders sort through pros and cons," UBS' Art Cashin wrote in his morning note. "Standard script says open down, circle the wagons and try to rally. While Europe is open, U.S. may take lead from there. I think China may be more important than Greece. Stick with the drill – stay wary, alert and very, very nimble."

8:52 am | Germany's private banks will be OK | by Madeleine Nissen

Germany's private banking association BdB still sees the immediate consequences of a Greek default as manageable for the banking sector, saying the presence of German banks in Greece is limited.

"A Greek default could burden financial markets short-term," says BdB head Michael Kemmer, but the risk of contagion is not the issue it once was. "The rescue policy of the euro members also shouldn't be considered a failure per se, as the positive examples of Ireland, Spain, Portugal and Cyprus show."

Mr. Kemmer lays the blame for the failure of a deal with Greece, which he says is not ready to face reform.

8:48 am | Here's another company with Greek exposure | by Saabira Chaudhuri

Analysts at Barclays say that the bank holiday and capital controls imposed in Greece over the weekend will have a “minimal impact” on Dixons Carphone’s earnings before interest and taxes and “a negligible cash impact, if any.” Kotsovolos in Greece forms a small part of Dixons Carphone business with a less than 3% contribution to sales according to Barclays estimates. Dixon’s shares down 2% in afternoon trading.

8:47 am | For U.S. traders, it's fear vs. cynicism in Greek crisis | by Paul Vigna

Throughout this entire byzantine Greek miasma, the market has been driven by two emotions: fear and cynicism. Fear that Greece’s debt crisis will spiral out of control, cynicism that all the dire warnings are merely part of the ongoing game of kick the can, a game that seemingly has no end.

Even amid Monday’s red glow on the monitors, you can see these twin dynamics. “The overnight extremes have so far been corrected,” Joan McCullough of Longford Associates, wrote. “What flew is off its highs; what bombed is off its lows. Typical. You know what happens now, right? We are gonna’ be hostage to red headlines all week; so fasten your seat belt and wear a neck brace.”

In terms of numbers to watch, for U.S. traders at least, Ms. McCullough pointed to 2078.20 as a line in the sand for the bulls. It they can take that level, trading on this side of the pond might remain relatively under control. (Photo: Getty Images)

8:46 am | No money from Macedonia, OK? | by Paul Hannon

In case it slipped by Sunday, a reminder than Macedonia’s central bank has issued a decision prohibiting capital outflows to Greece. Moving money into Greece right now may seem like a counter-intuitive move, but just in case anyone is contemplating such a bold stroke, it’s not going to happen from Macedonia, ok?

8:43 am | Meanwhile, on the VIX | by Saumya Vaishampayan

CBOE Volatility Index futures are on the rise amid this broad risk-off sentiment across the globe. VIX July futures are up 7.4% to 15.60 and August futures rose 4.7% to 16.20. Meanwhile, S&P 500 futures are sharply lower, down 1.1% to 2073. "From a risk perspective, events over the next week should be treated as potentially open-ended. Locking into a target for an equity market pullback or peak level in volatility is dangerous given the range of possible outcomes," writes Jim Strugger of MKM Partners. VIX closed at 14.02 on Friday and hasn't yet opened. The VIX, often called the U.S. stock market's "fear gauge," averages about 20 over the past 10 years.

8:38 am | Bitcoin price rising amid Greek crisis | by Paul Vigna

There’s one group of traders who are excited about the Greek crisis – bitcoin traders.

This morning the price of bitcoin, a digital currency run across a decentralized network of computers, was at $254, according to CoinDesk, the highest it’s traded since early April. Its high for the year is about $300, and it’s all-time high is about $1,150, set in December 2013.

As an alternative to fiat currencies, bitcoin is almost predetermined to rise whenever financial crises strike. The currency itself was born of crisis: launched in January 2009, it was seen as a response to the Panic of 2008 and quickly attracted a small but dedicated cadre of users.

The currency got its first big boost in 2013 amid the Cyprus crisis. When the government announced its initial “bail-in” of depositors, the panic drove some people into bitcoin. It spiked to as high as $230, after trading at $13 in January.

It’s hard to see such a spike happening again. For one thing, the bitcoin market isn’t nearly as thin, illiquid, and rudimentary as it was then (though it still is those things to a lesser extent). For another, so much water has passed under bitcoin’s bridge, the speculative fervor’s worn off. Still, if it starts looking really bad for Greece and the euro, some folks might be willing to try the alternative.

Ultimately, Greece is seen not only as reason to bid up bitcoin, but some hope the Hellenes, in their desperate straits, would maybe do the previously unthinkable: dump the euro…and adopt a digital currency.

There’s a spoof news story that’s been hanging around bitcoin circles: Yanis Varoufakis, the Greek finance minister, announcing to his stunned ministry that the beleaguered nation would drop the euro and adopt bitcoin. It’s a joke, of course, but the idea of a nation digitizing its currency is taken very seriously.

8:30 am | A U.S.-listed Greek ETF is down 16% | by Kevin Kingsbury

Greece’s stock market may be closed this week, but that doesn’t mean investors can’t play how the country’s equities will fare.

For starters, there’s the Global X FTSE Greece 20 ETF, trading on the Nasdaq under the ticker “GREK.” It’s made up of the Athens Stock Exchange’s 20 biggest companies by market cap. After losing more than half its value between last June and the early days of 2015, the ETF has gone sideways since. But it may set a fresh 3-year low today as equities slide globally on the potential of a Greek default. GREK is down 16% premarket at $9.85; April’s nadir was $9.76.

8:29 am

Says @simon_nixon (@wsj). And he's right. pic.twitter.com/yX9aK3uDOV

— Jorge Galindo (@JorgeGalindo) June 29, 2015

8:25 am | What's the effect on emerging markets? | by Margit Feher

The real risk for emerging markets from the Greek crisis is whether it triggers broader contagion in the eurozone and global financial markets, says Capital Economics. Direct links between Greece and emerging markets are limited beyond a handful of economies in emerging Europe.

However, “the concern is that a financial crisis in Europe would lead to a collapse in investor risk appetite, which in turn would disrupt capital flows to emerging markets,” says Capital Economics’s Neil Shearing. Should that happen, the fallout would be more serious than the anticipated onset of U.S. tightening, he adds. Malaysia, Hungary, Turkey and South Africa look exposed. Assuming the problems in Greece remain contained, developments elsewhere notably in China will continue to have a greater bearing, he says. (Photo: AP)

8:21 am | All bets are on | by Josie Cox

Jean Pierre Durante, an economist at Pictet Wealth Management, thinks risks of a Grexit have increased. “But we still think that Greece can probably stay in the euro-zone. In any case, neither a no nor a yes in the referendum will end uncertainty with regards to the euro crisis. All bets are on.”

8:20 am | Deutsche Telekom reassures on Greek subsidiary | by Archibald Preuschat

Deutsche Telekom says its Greek subsidiary OTE is financially sound. The company, which owns 40% stake in OTE, fully consolidates the unit in its balance sheet. The financial situation in OTE is not comparable to the conditions in Greece at the moment, Deutsche Telekom says. While the state owns 10% plus one share in OTE, and the rest is in free float. A Telekom spokesman declined to speculate about a possible exit by Greece from the euro zone. Shares of Deutsche Telekom were trading 3.5% lower amid an overall weakness on the DAX.

8:08 am | Jean-Claude Juncker urges a Yes vote | by Phillipa Leighton-Jones

From colleagues in Brussels:

The European Commission appealed on Monday to the Greek people to vote “yes” in a referendum on its international bailout, warning that a risk of the rupture of the European Union was real.

They report that Jean-Claude Juncker, the commission’s president, said: “You shouldn’t commit suicide because you’re afraid of dying. You should say ‘yes’ regardless of what the question is.”

A “no” vote in the referendum “will mean that Greece is saying no to Europe,” Mr. Juncker said.

Mr. Juncker rejected the argument by Greek Prime Minister Alexis Tsipras saying that a “no” vote by Greeks on July 5 would give the government a better negotiation position in the rescue talks.

(Photo AFP/Getty Images)

8:04 am | U.S. stocks a darker shade of red | by Paul Vigna

The Mouseketeers in the U.S. equities market are set to join in the fun today. Stock futures are down sharply, with S&P 500 futures off 21 and Dow futures off 173.

U.S. stocks have been trading in a tight range for months now, so the real thing to look for isn’t necessarily stocks in the red – that seems inevitable today – but how deep in the red. The S&P 500 has been trading in a band roughly between 2120 and 2080 since March (if you go back to February, it goes to about 2050). So, for U.S. stock traders, they’ll be looking to see if that 2080 mark gets taken out decisively.

“The plunge in stock market futures overnight needs to be immediately recouped to have faith that stocks can move back to new high territory,” Greywolf Execution Partners’ Mark Newton said, a guardedly optimistic note that shows U.S. traders aren’t panicking quite yet.

8:04 am | François Hollande says 'No' may make exit inevitable | by Phillipa Leighton-Jones

This from colleagues in Brussels and Paris:

Speaking after an emergency meeting with top ministers and finance advisers, French President François Hollande warned that a “no” vote by Greeks on July 5 and a refusal by the Athens government to return to the negotiating table may make an exit inevitable.

“It’s a question of knowing whether the Greeks want to remain in the eurozone–which is where they belong in my opinion–or if they will take the risk of exiting,” Mr. Hollande said. He stressed that the French economy and the wider eurozone excluding Greece is now better insulated from contagion than at the beginning of the Greek crisis.

7:58 am | Merkel is open to talks with Tsipras | by Phillipa Leighton-Jones

This from our colleague Andrea Thomas in Berlin:

German Chancellor Angela Merkel would be willing to talk with Greek Prime Minister Alexis Tsipras if he expressed such a wish, Ms. Merkel’s spokesman said Monday.

“Of course she is open for talks with Mr. Tsipras if he expressed such a wish,” said Ms. Merkel’s spokesman Steffen Seibert. But he cautioned that “facts are now on the ground,” pointing to Athens’ surprise decision on Saturday to hold a referendum on bailout terms by Greece’s international lenders after eurozone finance ministers rejected a Greek request for a one-month extension to its bailout.

7:49 am | Treasurys undo Friday's big selloff | by Min Zeng

It's all about Greece as the nation is on the brink of a default. Fears of a broad knock-on effect has rattled global markets, sending investors piling into safe-haven Treasury debt. The flight-to-safety was most hectic during Asian trading, with the 10-year Treasury yield dropping to 2.297% at one point; it's currently at 2.339% recently versus Friday's 9-month finishing high of 2.48%.

7:45 am | Meanwhile from the IMF... | by Paul Hannon

The Fed should hold off until mid-2016 before raising rates from zero, IMF paper says http://t.co/gFIAAiMtlV via @WSJecon

— Paul Hannon (@PaulHannon29) June 29, 2015

7:43 am | by WSJ

How Alexis Tsipras’s Greek referendum call came after creditors covered his proposals in red ink http://t.co/71O7mFXn0I

— WSJ Europe (@WSJeurope) June 29, 2015

7:41 am | There's a silver lining...for oil | by Ese Erheriene

Oil traders betting prices will fall are welcoming the market uncertainty posed by the Greek debt crisis to the future of the eurozone. The dollar is up against the euro and some other major currencies as a result. This is making dollar-denominated crude more expensive for other currency-holders, which typically leads to demand falling and prices dropping. "I'm short oil right now, so this is good news for me," says a trader at Mercuria.

7:39 am | 'I wish I'd sold them all last week' | by Josie Cox

Torgeir Hoien, portfolio manager at Norwegian asset manager SKAGEN, says that the situation around Greece “is very very serious” and there is a lot of uncertainty around what will happen next. He says that he sold out of Greek bonds last year and this morning ditched his holding in Italian and Portuguese debt out of fear that Greek contagion could get worse. “I wish I had sold them last week,” he said. He added that he had increased his holding of German government bonds last week and still holds some Spanish bonds. He broadly expects the Greek people to accept austerity measures demanded by the country’s creditors in exchange for further aid in next weekend’s referendum. Issues, however, will likely drag on for months, he says. (Photo: Getty Images)

7:34 am | What this all means for the Swiss franc | by Chiara Albanese

Outflows from the eurozone as the Greek crisis escalated over the weekend prompted the Swiss National Bank to intervene in markets overnight to ease the pressure on the Swiss franc.

The euro fell about 0.4% against the franc as markets opened in Asia, but has now climbed back and is trading about 0.3% lower against the franc.

“Demand for the franc has also been limited due to SNB intervention in spot markets,” said Stephen Gallo, a strategist at Bank of Montreal.

Ahead of the referendum to be held in Greece next weekend, he expects the euro to remain above 1.0250 but below 1.0500 against the franc.

Central bank interventions are reducing the attractiveness of the currency as a safe haven. More interventions are likely to take place in the coming days, said Josh O’Byrne, analyst at Citigroup. “The currency market is going to continue to be volatile but the franc isn't such an attractive safe haven with the central bank working against you,” he said.

7:28 am | Three scenarios from Oxford Economics | by Emese Bartha

Oxford Economics sees three possible scenarios. First, political breakthrough and path towards euro re-integration, to which it assigns a 30% probability. Second, a period of extended brinkmanship and crisis, which ultimately ends in exit--Oxford Economics also sees a 30% probability. Third, a negotiated exit from the euro, probably announced within month, Oxford Economics says, seeing here a 40% probability. "The eurozone runs out of patience and an exit deal is negotiated," it says, adding that this deal involves Greece staying in the European Union.

7:18 am | Greek government bonds continue to take a hit | by Nick Cawley

Respite? Negative.

Greek government bond yields continue to rise Monday, in contrast to other non-core eurozone bonds which have pared earlier losses. Short-dated government bonds are the worst affected, with the two year quoted with a mid-yield of 34.10%, just over 150 percentage points higher.

The ten-year yield is up 3.75% at 14.21 percentage points.

Ten-year Italian bonds are currently quoted at 2.315%, up 1.7 percentage points, but sharply lower than Monday’s ‘spike’ high of 2.785%, according to data from Tradeweb. (Photo:: Reuters)

6:29 am | by Emre Peker

“The Greek debt crisis really is a ‘crisis’ now” - Markets plummet but still not in panic mode: http://t.co/VoNegXoLIt @TomStub @JosieCoxWSJ

— Emre Peker (@wsjemre) June 29, 2015

6:28 am | How exactly do the capital controls work? | by Phillipa Leighton-Jones

Want to know more about that six-day bank holiday and capital controls? Here's our explainer with everything you need to know.

6:22 am | 'Greek default almost certain, global meltdown unlikely' -- Julius Baer | by Josie Cox

“While we agree with market expectations that a default of Greece on its obligations to the International Monetary Fund tomorrow is close to a 100% probability, we do not think that such a non-payment would cause a meltdown in bond or stock markets,” says Burkhard Varnholt, chief investment officer at Julius Baer. “First, such an event is being highly anticipated. Second, almost all Greek government bonds are owned by public institutions, which will neither panic nor default themselves. Third, sadly enough, Greece really does not produce more than 2% of European gross domestic product and will thus not become a ‘Lehman moment’,” he adds. “Notwithstanding the above, we consider the likelihood of a Grexit extremely low.”

6:20 am | Ado Properties calls off IPO citing market volatility | by Sarah Sloat

Germany’s Ado Properties delays its IPO citing market volatility. “Due to the ongoing uncertainty around the Greek economic situation and development, ADO Properties has decided to postpone its planned IPO until further notice,” it says, despite “broad and strong interest” from investors. The real estate company recently set a range of €20-25 for a bookbuilding that was to end Monday. DAX trades 3.2% lower.

5:45 am | Ryanair says flights are full | by Robert Wall

Ryanair Holdings PLC, Europe’s largest budget airline, said it has “not seen any impact on bookings” and that flights are full during the busy summer travel season. Passengers have been advised of the local banking limitations.

Travel group TUI AG said travelers are being advised to bring a mix of payment methods, including cash, debit and credit cards. So far, no special provisions are being made to allow travelers to rebook, though a spokeswoman said the company was monitoring the situation closely.

The Association of British Travel agents on Monday said, “At present we have no indication that holidaymakers will be disrupted.” It said it didn’t foresee a need for tour operators to rebook customers to different destinations, though the situation remains under constant watch. Though tourists aren’t subject to the cash limit at bank machines, the trade group warned of reports that cash at some outlets is limited. (Photo: AFP/Getty Images)

5:25 am | Greece promises that Greek holidays are still 'fun' | by Josie Cox

One for the tourists from the Greek Embassy in London:

“The Greek government informs those visiting or about to visit Greece, that the announced measures restricting the movement of capital do not affect in any way those who wish to make transactions or ATM withdrawals using debit or credit cards issued abroad. It should be also noted that there is ample availability of both fuel and all products and services that ensure a smooth and fun stay for the visitors in every city, region and the islands.”

“Greece continues to guarantee a high level of quality of services offered to visitors who have made our country a top tourist destination worldwide.”

It adds that the Minister of Tourism, Elena Kountoura, “reiterates that the Greek tourism remains high in the preferences of our visitors” and that tourists wouldn’t be affected “in any way” and would “continue to enjoy their holiday in Greece with absolutely no problem.”

Anecdotally, we hear flights are full to bursting. (Photo: Reuters)

5:06 am | If this saga ends... | by Chiara Albanese

Here's Standard Bank again: "Greece's economy amounts to less than 2% of Europe's economy. When this saga ends, European politicians will be able to focus on enhancing the productivity of the remaining 98%."

4:57 am | Tough words for Greece | by Josie Cox

Markets have already bounced back from their lows, and Demetrios Efstathiou, a strategist at Standard Bank, says that even though it’s “too early to say that the worst is over”, there are reasons to be optimistic.

“Greece is still in the eurozone, and may remain so, as the outcome of the referendum is likely to be pro-euro. Capital controls and closed banks buy Greece some time,” he says. He adds that “Greece’s economy amounts to less than 2% of Europe’s economy. When this saga ends, European politicians will be able to focus on enhancing the productivity of the remaining 98%.”

Finally, he says that Greece is a very unique case and should not be compared to other countries. “[It’s] a dysfunctional and corrupt economy unable to embrace reforms. Comparisons with other countries in the eurozone are inappropriate […]Portugal, Ireland, and Spain are far stronger than a few years ago.” (Photo: EPA)

4:55 am | Grexit could amplify Italy's problems | by Manuela Mesco

If it becomes clear that the monetary union is not an irreversible choice, "the problems of a single country would be amplified," says economist Luigi Zingales of the University of Chicago, speaking to Italian daily La Stampa. Of Italy, he says: "The main problem is that we're not growing," adding that an Italian contagion could be either psychological or based on regulatory issues. Facing crowds of Greeks withdrawing money from ATMs, "the question to ask is: would [Italians] too think to withdraw their money from the banks or not?...There's no obvious reason to do that," he said. But psychological factors could lead to consider it as a rational choice. In a case of a Greek default, it would be key to understand "if Germany is available to grant an unconditioned credit to Italy, too." If the answer is no, "we would be at risk."

4:26 am | Banks in Spain and Italy are feeling the pain | by Phillipa Leighton-Jones

Italy's FTSE Mib and Spain's IBEX are neck-and-neck leading the falls in Europe.

The MIB is down 4.1%, one of the worst-performing indexes among the main European bourses. Banking stocks are suffering the most. UniCredit is down 5%, Intesa Sanpaolo is down 5.5%, Banca Monte dei Paschi di Siena loses 6.4%. FCA is down 4.5%.

Spain's IBEX is down 3.92%, with Banco Popolar Espanol (down 7.56%), Sacyr (down 6.34%), Banco Santander (down 5.49%) and Banco de Sabadell (down 5.47%) leading the losses.

4:05 am | The bond markets are taking this too lightly, says BlueBay | by Tommy Stubbington

Even after Monday's heavy selloff in eurozone bonds the market still looks overly complacent on the risk of Greece leaving the eurozone, says Mark Dowding, co-head of investment grade fixed income at BlueBay Asset Management.

The selling has only taken yield spreads in Spain and Italy back to where they were just over a week ago. "We are taking out some of last week's optimism. There still seems to be some complacency," Dowding says. If Greece exits the eurozone, that raises the chance of another country eventually following to a non-neglible level which isn't reflected in current prices, he says.

4:01 am | Treasurys are rallying | by Nick Cawley

U.S. Treasurys are rallying, along with other core eurozone bonds, after Greece calls for a referendum and closes its banks. The yield on the 10-yr U.S. government bond trades at 2.35%, from around 2.40% at the end of the last week, after having touched an intra-day low of 2.30%.

U.S. Treasury futures trade just over 1 point higher at 126-035.

3:59 am | Let's not forget China in all of this | by Hong Sheng

Chinese stocks ended sharply lower as panic-driven selling continued despite an aggressive move by the country's securities regulator to appease investors. The People's Bank of China on Saturday announced a quarter-point interest-rate cut paired with a cut to some banks' reserve requirements--a combination easing last seen in 2008. Nevertheless, the Shanghai Composite Index finished the day off 3.3% at 4053.03, and hit an intraday low of 3875.05.

3:50 am | SocGen tells clients to avoid Spain for now | by Giles Turner

The impact of the Greek crisis could be “rather limited,” say analysts at Société Générale, in part because “the learning curve of European leaders (e.g. Draghi, Schauble) to manage financial markets during a political crisis has strongly increased since 2010.” However, this hasn’t stopped Société Générale recommending clients avoid Spain. “Overall contagion effects should thus be limited, although Spanish assets could suffer from political risks raised by the Podemos party in the context of the general election that must be held by 20 December 2015. So we recommend avoiding Spanish assets, including IBEX, while SMI and FTSE100 should outperform.”

Spain's IBEX is now off 4.42%.

3:38 am | by Richard Barley

The Italian 10-yr yield move in a longer-run context: pic.twitter.com/Kr5o9f6hVh

— Richard Barley (@RichardBarley1) June 29, 2015

3:37 am | Thought about what this means for oil? | by Georgi Kantchev

Oil prices are tumbling on Monday in tandem with other financial markets as the escalating Greek crisis hits confidence and roils currency markets.

Brent, the global benchmark, is down 1.6% to $62.27 while U.S. crude is down 1.7% at $58.64. The stronger dollar is weighing on oil which is priced in dollars and becomes more expensive for holders of other currencies when the greenback appreciates.

There are also fears that a possible contagion from Greece will hurt European oil demand. “Most of the European oil demand growth this year is coming from the southern countries of Europe. Therefore if there was a Greek default and a contagion of a risk premium to other southern European countries it could have a negative impact on European oil demand,” says Olivier Jakob of Petromatrix.

3:36 am | Can the markets put pressure on the eurozone? | by Josie Cox

“Some people have suggested that the market could pressure the Eurozone to go back to the negotiating table,” says Gary Jenkins, chief credit strategist at asset manager LNG Capital. “However one day’s trading does not a crisis make. To put any real pressure on the Eurozone the selloff would have to be significant and sustained.” (Photo: AFP/Getty Images)

3:35 am | Why Italian bank stocks couldn't trade first thing Monday | by Giovanni Legorano

Several Italian banks failed to start trading on Monday as fears over a Greek default induced a lot of investors to shed peripheral stocks, including Italian, with banks suffering the most.

Sales orders on Italian stocks, in particular for financial stocks, piled up before market opening. At the start, the sales orders were so many that the system didn’t manage to process them, something that often happens when specific news cause a sell-off on a stock.

Theoretical prices for Italian banks—the price at which they would have started trading—hovered losses of around 8% to 10% at the beginning of the trading session.

UniCredit SpA and Intesa Sanpaolo managed to start trading some time after the market opened, but were suspended immediately accumulating losses of around 6% in comparison with Friday’s closing price.

On Sunday, Italy’s banking lobby head Antonio Patuelli dismissed fears of contagion on Italian lenders, saying the country’s banks direct exposure to Greece is less than €1 billion.

3:29 am | J.P. Morgan's base case is for a 'Yes' vote | by Matthew Cowley

The "latest escalation in the Greek saga is clearly likely to lead to an initial knee-jerk selling," says J.P. Morgan, but there are several factors that will limit the damage. The ECB "has indicated that it will act to counter any contagion," and its response is "likely to be swift." The investment bank says its base case is for a "yes" vote in Sunday's referendum, "something which might be aided by increasing stress this week." Moreover, direct exposure to Greece beyond the official sector is minimal, and European banks have only €5 billion exposure to Greece, it says. "While this point will not be top of the agenda this week, we think that investors will come back to it before long."

3:28 am | The political scenarios | by Todd Buell

Even a ‘yes’ vote in the upcoming Greek referendum wouldn’t erase all uncertainty on the country’s future as it could force the government of Alexis Tsipras to resign, says Luigi Speranza of BNP Paribas. A vote in favor of the creditors’ proposal would show “that Greeks want to remain in the monetary union and are willing to shoulder a further fiscal squeeze” it also “would put the government in a very difficult position,” says Speranza. Tsipras’ resignation could lead to a ‘unity government’ which would likely enact measures called for by the creditors, says Speranza. Or else there could be an early election, which Syriza wins, “which would return us to square one,” he says. (Photo EPA)

3:26 am | UBS sees a case for the bulls, too | by Duncan Mavin

“Investors should see a sell-off in European equities around [the Greek] referendum as a buying opportunity,” said UBS AG’s Global chief investment officer Mark Haefele in a note. UBS said stocks should rebound given the ECB has “tools and the determination to restore calm to financial markets”; other central banks could help out in the same vein; financial and trade links to Greece are limited; the Eurozone is stronger than it has been in years; and the U.S. economy is picking up too. “Ultimately, based on the current situation, we believe remaining invested in Eurozone equities through this volatile period will be rewarded,” Mr. Haefele said in the note.

3:23 am | Keep your powder dry | by Josie Cox

Even after everything that’s happened this weekend, strategists at Societe Generale still see a deal being reached between Greek officials and the country’s international creditors, “triggering the starting point of a nice rally in eurozone equities.” “So keep some of your powder dry, as you may find a very good entry point in the coming days and weeks,” they write in a note.

3:22 am | But what's the Swiss franc doing? | by Chiara Albanese

What about the Swiss franc?

The Swiss franc -- a safe-haven currency at times of stress for the euro -- is attracting flows from the eurozone as the outcome of the Greek crisis remains unclear.

In case of a Grexit scenario, says UBS, and with it much larger safe haven flows occurring, the Swiss National Bank might cut deeper into deposit rates, which are currently -.75%.

To step the upward pressure on the currency, the SNB could also use foreign currency purchases to keep the around current levels. “As long as Grexit does not materialise I think intervention will be the main policy tool with the SNB not shying away from larger purchases,” says UBS.

The euro is down 0.5% against the franc so far today.

3:18 am | Athex will be closed for the week | by Phillipa Leighton-Jones

Greek officials have now confirmed that the Greek stock market will remain closed for as long as banks are shut, so that's at least for this week.

3:15 am | Here's what stocks are doing | by Phillipa Leighton-Jones

How are stocks faring? (Maybe cover your eyes if you’re a market bull):

Well, the Stoxx Europe 600 is down 2.5% in early trade, the Dax is down 3.3%, Spain’s Ibex is down 2.2%, France’s CAC 40 down 3.8% and the FTSE 100 is down 2.2%.

We’d tell you what the Athex is doing, but it’s closed today, according to a bourse official in Athens.

3:08 am | Watch the ECB's reaction carefully, says Deutsche | by Phillipa Leighton-jones

"One important factor to consider will be the ECB’s reaction function this morning. We’ve already got verbal evidence of support following the ELA decision with the associated statement including such rhetoric as ‘determined to use all instruments available within its mandate’ and the bank is ‘closely monitoring’ market conditions. Given the tools available, specifically QE, it’ll be interesting to see if we get an aggressive response from the ECB in the market this morning. It would certainly be a statement of intent from Draghi should he feel the need to accelerate asset purchases," says Deutsche Bank.

3:07 am | Illiquidity is not going to make the rush to some safe-havens easy | by Phillipa Leighton-Jones

"In terms of markets could this be a big test of the poor liquidity that there is at the moment. I'm sure most clients in Europe would like to lighten up on risk this morning and buy the safe havens but there are some markets (like European credit) where this will likely to be very difficult to do efficiently. I wouldn't expect panic at the moment but this could be a test of the new regime of awful secondary market liquidity," says Deutsche Bank.

3:02 am | Greek government bond yields continue to rise | by Josie Cox

Trading in Greek government bonds may be thin, but the picture is nonetheless bleak. The yield on the 2-year benchmark bond is at 33.17%--that’s more than 13 percentage point higher on the day. Yields rise as bond prices fall. The yield on the 10-year is at just over 14%, which is around 3.5 percentage points higher on the day.

3:00 am | Peripheral spreads widening a buying opportunity - Rabobank | by Chiara Albanese

The weekend’s events have taken Greece closer to the exit from the euro, Rabobank says, and peripheral spreads are undergoing a pronounced widening and core curves flattening bullishly on the back of safe haven flow, analysts say.

But based on expectations that the "yes" camp will win this week’s referendum, the bank’s base case remains that of Greece remaining in the eurozone and for some form of bailout extension being agreed. “The anticipated flattening of core curves and widening of peripheral spreads should be seen ultimately as opportunities to enter bullish peripheral spread and bearish core curve plays," says Rabobank.

2:54 am | by Richard Barley

Early snapshot of eurozone govvies from @Tradeweb: pic.twitter.com/CqZPUuJgtQ

— Richard Barley (@RichardBarley1) June 29, 2015

2:52 am | The euro is falling against the pound | by Gary Stride

EUR/GBP dropped to a near 8-year low of 0.6990 Monday, notes Commerzbank technical analyst Karen Jones. She expects this level to hold for now at least.

2:49 am | Not 2012, but still very messy, says Deutsche Bank | by Josie Cox

This may not be a repeat of the 2011/2012 Greek crisis, but things are certainly messy, says Francis Yared, head of European rates research at Deutsche Bank.

“The situation is different from 2010-2012 given (a) reduced direct exposure to Greece from the non-domestic private sector, (b) the improved capital and liquidity position of European banks, (c) the improved fiscal and external position of the periphery and (d) the existing ECB firewall,” he says.

Nonetheless, “given market optimism towards a Greek deal over the last week, the initial risk-off move could be pronounced,” he adds.

2:41 am | No dramatic portfolio changes | by Josie Cox

What’s the best way to play this situation? Bunds!

“The challenge for the market today is to see the bigger picture while confronted with a much higher stakes game in Greece,” says Peter Chatwell, a rates strategist at Mizuho International. In terms of how best to trade this situation, he says that buying German government bonds is “the safer trade than being short periphery.” He also advises against “making drastic portfolio change” just yet. (Photo: Bloomberg News)

2:38 am | Safe-havens | by Eleanor Warnock

Japanese government bonds gained on Monday as concerns about the Greek debt crisis spurred demand for safe-haven sovereign debt. Traders said that trading volumes of cash JGBs were subdued, however, as market participants awaited more developments on Greece during European market hours.

"The market is in risk-off mode," said a trader at a domestic bank. "People are cautious about what will happen when Europe wakes up."

2:35 am | The euro's moves today | by Gary Stride

The euro was sharply lower in Asia Monday.

EUR/USD opened 1% lower at 1.1050 then lost another cent, while EUR/JPY slumped to a 1-month low of 122.11 for a 1% loss. EUR/GBP traded below 0.70 for the first time since November 2007 and EUR/CHF dropped to a 3-week low of 1.03.

2:30 am | Watch the spread, says Goldman | by Chiara Albanese

The spread between Italian and Spanish bonds against Germany could widen up to 350 basis points in the event of a Grexit, according to analysts at Goldman Sachs.

“The situation is very fluid, but should it become clear that controls on deposits will be introduced and the government resort to making domestic payments, we continue to think that Italian and Spanish bond spreads would widen to around 200-250 basis points,” says Francesco Garzarelli, at the bank.

Intervening responses by the European Central Bank, such as a larger quantitative easing, would push them back down. “But this would need to be reinforced by institutional upgrades to the Euro area such as common deposit guarantees envisaged by banking union for their effects to be lasting.”

2:29 am | Meanwhile in Greek govement bonds... | by Nick Cawley

Two-year Greek government bonds are trading at 31.20%, up 11 percentage points. The five-year is trading up 3.92 percentage points at 19%, and the ten-year is up 3.33 percentage points at 13.87%.

2:20 am | The most 'difficult' week for Greece - UBS | by Chiara Albanese

Greece is facing what might well be one of the most difficult and decisive weeks in its modern history, says UBS.

Both banks and markets are set to remain closed until the Sunday referendum.

"Individuals are reportedly allowed to withdraw €60 in cash per day, which for many will be too little to avoid getting into further arrears on financial obligations," notes Beat Siegenthaler at the bank.

2:15 am | The big question: What are markets doing? | by Josie Cox

So how messy is it out there? The euro is currently 1.5% lower against the dollar, having hit a three week low of $1.0950 during Asian trading hours. Traders are seeing European equities opening around 4% lower. Future markets for southern European government bonds are due to open within the next few minutes. Elsewhere, gold—traditionally a sought-after asset during times of market stress—is 0.9% higher at $1,183.40 per troy ounce.

2:13 am | Welcome | by Phillipa Leighton-Jones

Thanks for joining us. We'll be walking you through the market reaction through the morning.