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Global Daily: Greece seeks new bailout deal

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Financial Markets

Greece’s government has asked Eurozone authorities for a third bailout in a last-ditch effort to secure a debt deal before the country’s current rescue deal expires.  The request is to cover all of the country’s financial needs for the next two years, along with a debt restructuring plan.  The move comes as Athens said that it would not make a €1.6 billion loan repayment to the International Monetary Fund (IMF) by a Tuesday deadline.  The eleventh-hour proposal from Greece for a new bailout program is unlikely to help the country avoid becoming the first developed country to go into “arrears” with the IMF.

European shares remained under pressure on Tuesday on Greek uncertainty, while the region’s government bonds posted small gains.  The Stoxx Europe 600 Index fell 1.3 percent at the closing, extending its second-quarter decline to 4 percent, which is the worst quarterly drop since 2012.  Meanwhile, Eurozone government bonds continued to show some resilience in the face of the Greek crisis with 10-year yields on Spanish and Portuguese debt sliding 6 basis points (bps) to 2.28 percent and 8 bps to 2.98 percent.  Italian 10-year bond yields fell 6 bps to 2.33 percent as the country sold €6.8 billion of debt.

High Income Economies

Partly due to the improving labor market, the Conference Board consumer sentiment index for the U.S. jumped more-than-expected to 101.4 in June from a downwardly revised 94.6 in May.  Economists had expected the index to rise to 97.4 from the 95.4 originally reported for May.  The expectations index also surged up to 94.6 in June from 86.2 in May, suggesting consumers are more optimistic about the near-term future.  Additionally, the Board’s present situation index climbed to 111.6 in June from 107.1 in May, indicating increased confidence in the current state of business and employment conditions.

Eurozone inflation slowed in June largely due to another sharp fall in energy prices.  Inflation eased to 0.2 percent (y/y) in June, in line with economists' forecast, from 0.3 percent in May, flash data from Eurostat showed Tuesday.  Currently, inflation is well below the European Central Bank's targets of below, but close to, 2 percent over the medium term.  Core inflation that excludes energy, food, alcohol and tobacco also slowed marginally, from 0.9 percent in May to 0.8 percent in June.

The U.K. economy grew more than previously estimated in Q1, the Office for National Statistics showed Tuesday.  GDP gained 0.4 percent (q/q), revised up from the 0.3 percent growth reported earlier.  According to the Office for National Statistics (ONS), the reason for the revision mainly due to "the introduction of the interim solution for the Construction and Cost Price Indices which have impacted on both the construction industry and gross fixed capital formation estimates".

Developing Economies

Europe and Central Asia

Turkey's foreign trade deficit narrowed in May from a year ago, although it was wider than economists’ expectations, preliminary figures from the Turkish Statistical Institute showed Tuesday.  The trade deficit narrowed to $6.8 billion in May 2015 from $7.2 billion in May 2014.  Economists had expected a deficit of $6.6 billion. In April, the shortfall was $5.0 billion.  Exports plunged 18.8 percent in May (y/y) after no growth in April, with shipments to the European Union (EU-28) dropping 21.3 percent.  Imports dropped 14.4 percent following an 11.1 percent decrease in April.

Sub-Saharan Africa

Kenyan annual inflation rate rose to 7.0 percent (y/y) in June from 6.9 percent in May, mainly due to jump in food prices.  Food prices increased 13.4 percent up from 13.2 percent growth in May.  On a monthly basis, consumer prices rose 0.3 percent (m/m) as lead by higher transport prices.

South Africa’s trade balance turned into a ZAR 5.0 billion trade surplus in May from an upwardly revised ZAR 1.5 billion deficit in April.  The latest reading is the largest surplus this year and mainly due to a surge in exports, which jumped 4.6 percent in May (m/m) to ZAR 88.94 billion.  Meanwhile, imports shrank 2.9 percent to ZAR 84.99 billion