Markets greet Greek vote with shrug

Global marke t s barely flinched Monday after Greek voters overwhelmingly rejected the terms of a bailout package from the country’s creditors.

The drop in U.S. and European markets was not nearly as bad as some analysts had feared, following Sunday’s referendum that saw 61.3 per cent of Greeks vote ‘no’ to a series of tax cuts and reforms that would save Greece from defaulting on its debt.

The S&P 500 f el l 0.39 per cent, or eight points, to 2,068.76, while the S&P/TSX Composite Index fell 0.60 per cent, or 88.82 points, to 14,593.57. In the clearest sign that investors were indifferent to the referendum results, the euro fell only 0.4 per cent.

“After five years, you have to believe a measure of the news from Greece is already built into the market,” Bruce Bittles, chief investment strategist at Milwaukeebased Robert W. Baird & Co. “How many times can you be concerned about the same news? It loses its effectiveness over the near term.”

Not all parts of the market were muted on the news. Prices for Western Texas Intermediate oil, the U.S. pricing standard, plummeted 7.5 per cent as fears have grown that the crisis in Greece is adding further strain to global growth. That was the biggest one-day drop since February.

Bill Gross, manager of the Janus Global Unconstrained Bond Fund, told Bloomberg TV on Monday that he was surprised markets were so indifferent to Greece.

“I think they have a week or two to settle this,” he said.

Gross warned that the calm was “the eye of the hurricane” and sees a 70 to 80 per cent chance that Greece will leave the 19-member eurozone — a development he warns would slam financi al markets around the world.

Greece is nevertheless close to an endgame, with the country’s banks teetering close to collapse. If a resolution is not found soon — whether a last-minute bailout or Greece’s exit from the euro — Greek banks will soon be unable to meet the collateral requirements that are needed to continue to receive funds from the European Central Bank’s Emergency Liquidity Assistance program.

Without ELA funds propping up the banks, the government would likely run out of money to continue paying its workers. That would force Greece to drop the euro and begin printing its own money to keep the state afloat.

But both Greece and the eurozone have teased markets with brinkmanship repeatedly in the past five years. Instead of panicking at any hint of crisis, it seems markets have learned to take a wait-and-see approach.

“It is still early, and bigger moves may well surface in the near future, but I do not expect to see the start of another financial crisis,” said Jan von Gerich, chief strategist at Nordea Bank AB in Helsinki.