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 Yields on top-rated German 10-year Bunds, the benchmark for European
borrowing costs, fell as some investors chose to preserve their
capital in low-yielding but relatively safe assets. European stocks
dipped and were set for the biggest weekly drop in two months, while
the euro edged higher.
The moves were marginal, though, as investors did not want to
position too heavily on either side.
"The European market is frozen ahead of the Greek referendum," said
Markus Allenspach, head fixed income research at Julius Baer.
Supporters of Greece's bailout terms have taken a wafer-thin lead
over the "No" vote backed by the leftist government, 48 hours before
Sunday's referendum, an opinion poll showed.
The poll by the respected ALCO institute for newspaper Ethnos put
the "Yes" camp on 44.8 percent against 43.4 percent for "No". But
the lead was within the pollster's 3.1 percentage point margin of
error, and 11.8 percent of respondents said they were still
undecided.
"Attention will be pinned on Greece and this is likely to see
investors cautious as we head into the weekend ... Even if we get a
Yes' vote, this means the country must go back to the negotiation
table and try to knock something together again," IG market analyst
Stan Shamu said.
"However, it's a lot worse on the other side as a 'No' vote will
present a host of uncertainties that could really rattle markets ...
Either way, traders will need to buckle up for a tumultuous Monday."
Bund yields were down 3 basis points at 0.83 percent. The
FTSEurofirst 300 edged 0.25 percent lower to 1,524.05 points, down
3.1 percent for the week.
In lower-rated euro zone bond markets, Italian and Spanish
10-year yields were down around 2 bps on the day, both at 2.30
percent, having pulled away from German equivalents by around 30 bps
over the course of the week.
The euro rose 0.1 percent to $1.1097.
Many investors were lightening up positions and staying on the
sidelines.
"It's far from obvious which way it is going to go...and you
definitely couldn't position on the back of that at the moment,"
said Thomas Laskey, an investment manager at Aberdeen Asset
Management.
While Europe was fixated on Greece, a rout in Chinese stock markets
continued. Chinese markets, which had risen as much as 110 percent
from November to a peak in June, have collapsed since June 12,
losing more than 20 percent.
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The Shanghai Composite Index was down 5.8 percent, while the CSI300
Index fell 5.4 percent.
JOBS
The dollar fell against a basket of currencies on Friday, hurt by
softer-than-expected U.S. employment data.
The U.S. payrolls report showed employers hired 223,000 workers last
month, fewer than the 230,000 increase forecast in a Reuters poll.
The government also downgraded its reading on April and May job
growth while wage growth remained subdued.
The dollar index was down 0.11 percent at 95.006, retreating from a
four-week high of 96.422. The dollar was buying 122.93 yen, down
slightly on the day.
"With liquidity thin and the Greek referendum coming up, not many
would want to take large positions going into the weekend. The U.S.
jobs report has taken the wind out of the sails for the dollar for
the time being," said Alvin Tan, currency strategist at Societe
Generale.
Oil prices dropped as a rising U.S. rig count stoked fears of
oversupply. Brent crude was down 45 cents at $61.62 a barrel, while
U.S. crude was $56.56, down 37 cents. [O/R]
Spot gold bounced off a 3-1/2 month low. [GOL/]
(Additional reporting by Anirban Nag, Liisa Tuhkanen and Alistair
Smout in London; Editing by Ralph Boulton)
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