Tokyo Stock Exchange
A man stands next to a stock quotation board displaying Japan's Nikkei Average (top) and the exchange rates between the Japanese yen and the U.S. dollar at the Tokyo Stock Exchange in Tokyo March 13, 2015. Reuters/Yuya Shino

Final week of the financial year

This is the final full week of the Australian financial year – it will make intraday direction tricky as managers begin to close the books and macro issues push and pull investor sentiments.

What’s spiking my interest

· Grexit will be the talk of the week – despite the fact Greece’s economy represents only about half of New South Wales – contagion is the risk.

Into the final hours of the emergency summit and Prime Minster Tsipras has back-to-back meetings with the European Council, ECB and IMF, followed by the EU Commission. There’s talk of a ‘definitive’ solution – will this be more political posturing or a solution that will break the deadlock?

Asia should hear of the plans from 4pm AEST onwards as the summit begins at 8.30pm AEST and the solution will need to be agreed upon by then.

· China – Shanghai recorded a 13.3% decline last week. This is its worst weekly lost since 2008. The technical correction is not a concern considering the meteoric rise of Chinese indices over the past six months. It will be an issue if we see a sustained run on and a messy decline.

· ASX underperformance is starting to see a gap up – look for support from Asia as the outperformance of China in particular unwinds. US risk, however, could spoil the rise.

· Fed ‘lift-off’ month is moving and analysts are beginning to shift their expectations back several month, having fully processed the FOMC from last week. September remains the month of choice but December is starting to catch up as the second favourite.

· Low-for-longer will positively impact emerging markets (EM). EMs still hold a massive amount of US-denominated debt. Increases to rates will see these nations facing liquidity issues. Pushing lift-off back several months will postpone liquidity issues. However, even with an extra two or three months, it appears EMs will not be truly ready for increases in US rates.

· Australia – low-for-longer is a headache for the central bank and Australian equities.

· AUD remains stubbornly high at 77.6 cents – the market is clearly seeing USD weakness for the foreseeable future, with FOMC holding the line longer than expected. This is hurting Australian exports.

· ASX outperformers of the past year have been USD earners. Share price expectations are built on the idea of a lower AUD increasing revenue repatriation from all nations. It’s a risk to watch.

Ahead of the Australian open

Asian markets opening call

Price at 8:00am AEDT

Change from the Offical market close

Percentage Change

Australia 200 cash (ASX 200)

5,597.30

0

0.01%

Japan 225 (Nikkei)

20,168.50

-6

-0.03%

Hong Kong HS 50 cash (Hang Seng)

26,890.80

130

0.49%

China H-shares cash

13,269.30

83

0.63%

Singapore Blue Chip cash (MSCI Singapore)

372.18

-0

-0.06%

US and Europe Market Calls

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

WALL STREET (cash) (Dow)

18,063.50

-55

-0.31%

US 500 (cash) (S&P)

2,115.58

-5

-0.27%

UK FTSE (cash)

6,719.60

17

0.26%

German DAX (cash)

11,110.20

-32

-0.29%

Key inputs for the upcoming Australian trading session (Change are from 16:00 AEDT)

Price at 8:00am AEDT

Change Since Australian Market Close

Percentage Change

AUD/USD

$0.7764

0.0001

0.02%

USD/JPY

¥122.820

-0.315

-0.26%

Rio Tinto Plc (London)

£27.40

-0.10

-0.35%

BHP Billiton Plc (London)

£13.60

0.27

2.03%

BHP Billiton Ltd. ADR (US) (AUD)

$28.21

-0.20

-0.69%

Gold (spot)

$1,199.30

-1.70

-0.14%

Brent Crude (August)

$62.65

-1.55

-2.42%

Iron Ore (62%Fe Qingdao)

$61.36

-0.41

-0.66%

EVAN LUCAS Market Strategist

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