Greece was the notable exception. Its stock exchange up over 2% in morning trade. A move that could be read optimistically as a sign of increased optimism from within the country, but could also be linked, cynically, to the announcement that Yanis Varoufakis will no longer be the country’s finance minister.
Such movements are far from violent, an indication, perhaps, that, despite a expectations the Greek people would stick with the devil they have come to know intimately over the past six years, much pessimism was already priced into markets.
Where things go from here is anyone’s guess, the French President and German Chancellor are to meet later today in Paris and a statement is expected shortly thereafter. Greece’s president Alexis Tsipras’ hand has been strengthened; the creditors stance will have hardened, but some goodwill might have been regained through the resignation of Varoufakis. All of this is, as many commentators have noted, uncharted territory.
Trevor Greetham, head of multi-asset at Royal London said the vote is a defining moment for Tsipras.
“The referendum was never going to end uncertainty for markets but this outcome increases the likelihood of prolonged bank closures, civil unrest and Euro exit,” he said, adding that it is likely that the euro will sell off further.
“The European authorities will respond forcefully to limit market contagion if necessary though they may not need to do more than talk as the spillover into other peripheral bond markets has been very limited to date.” According to Greetham, while this vote casts serious doubt on the long term political viability of the Euro area. “Especially,” he said, “if Greece leaves the Euro, devalues and eventually regains control of its destiny in the way Iceland has.”
But, he added: “This is a long term story. In the shorter term it is hard to see developments in a country making up about one percent of European Union GDP and one tenth of a percent of its stock market capitalisation having a lasting impact on world markets.”
