Changes in the Greek government

Evangelos Venizelos became the new finance minister of Greece. He replaced Giorgos Papaconstantinou. Some experts thought that the former Vice President of the European Central Bank, Lucas Papademos will be a new minister. He refused the offer. Inauguration of the new Greek government is scheduled at 12.00 CET

However, the changes in the government do not solve the problem of increasing political risks. Papandreou government still holds a majority in parliament, but recently it was whittled from 10 to 4 members. Greek media informs that among the socialists (the ruling party)  there is a  growing aversion to the new austerity package. The early elections in Greece are the real scenario in the coming months.

Greece continues to be the center of attention of financial markets. Emotions are not caused by announced today changes in the government of Prime Minister Papandreou. However, such emotions can provide a meeting of German Chancellor Angela Merkel and French President Nicolas Sarkozy.

Berlin and Paris represent different attitude towards participation of private investors in the new aid package. Germany want their mandatory participation (The French - only voluntary). The dispute, in which the European Central Bank and the European Commission are also involved, has a great negative influence on the markets. Therefore, any compromise would be a positive signal for the investors. Politicians are aware of that. That is why we can expect some calm statements after the meeting.

Another weak data from the U.S.

Yesterday, most investors focused on better-than-expected data from the U.S. housing and labor markets. Meanwhile, the Philadelphia Fed index should be at the center of attention. In June, the index went down sharply, falling to -7.7 points from 3.9 points. in May. This is the lowest reading since July 2009.

The data strongly disappointed. The market consensus stood at 6.9 points. It's another month when the economic activity in the Philadelphia area was well below forecasts. In May, Philadelphia Fed index dropped to 3.9 points from 18.5 points (while the market expected the growth to 20 points). After the NY Empire State index, the Philadelphia Fed index is another serious warning coming from the U.S. manufacturing sector.

Events to watch

Key events: Trade balance in the Eurozone (11.00 CET, 5.00 ET), University of Michigan Index (15.55 CET, 9.55 ET. ) Today also June derivatives expire, which can have a big impact on the behavior of equity markets.      

Paweł Kordala

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