Monday, July 6, 2015
Increased odds of Greece leaving the Euro-zone following the surprise weekend vote are weighing on the broader market indexes today. But there is no panic in the marketplace and the market weakness is less severe than would otherwise be expected.
The Greek finance minister has resigned and the political process to negotiate a new deal has gotten underway already. But the only way the Greek situation can move towards resolution at this stage is if the creditor institutions, Germany in particular, will back down from its earlier stance on taxes and pension reforms. But hard to envisage that happening without creating a new precedent for Italy, Spain and Portugal who will be closely watching what happens to Greece.
Bottom line, it has become difficult to come to find common ground between the two sides following the referendum. Relative to before the referendum, the odds of a ‘Grexit’ have increased, which adds to market uncertainty and volatility.
In corporate news, Aetna (AET) is acquiring fellow health insurer Humana (HUM) for $34.1 billion in cash and stock deal that will reduce the number of managed care players from the current five to four. This industry consolidation is an unintended consequence of ObamaCare, with greater commoditization of the industry’s offerings putting a premium on size and scale. The financial logic of the two smaller industry players coming together to better compete is compelling, but it isn’t clear at this stage whether regulators will sign off on it.
Sheraz Mian
Director of Research
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