The latest chapter in the Greek saga; a July 5th referendum, capital controls and bank/stock exchange closures, has unsurprisingly triggered a sell-off in global risk assets (as well as a slew of email commentaries). Equities have been hardest hit; European bourses are down c.1.5% to 5.1% on the day; not insignificant but not disastrous. Emerging markets (where Greece sits) have fallen close to 2%. Importantly, outside Greece, peripheral bond spreads (the additional return you are paid over German bunds for investing in the likes of Spanish, Italian and Portuguese debt) are showing relatively little sign of stress. This reflects the market’s perspective that the global economy, in particular Europe, has the tools necessary to deal with this.
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