The Greek elections set the stage for a volatile week in the financial markets but, barring a surprisingly negative result, immediate policy changes look unlikely though a heavy schedule of high level meetings will keep investors on edge.
G20 leaders gather in Mexico on Monday, the US Federal Reserve's rate setting committee meets for two days from Tuesday, euro zone finance ministers meet Thursday, and a mini-summit of German, French, Italian and Spanish leaders is scheduled for Friday in Rome.
Announcements from any one of these events could move markets sharply although most big investors currently hold extremely risk averse positions, and don't look set to change their views in the coming week, or for months, on fears the crisis in Europe has yet to reach its nadir.
“If there's a positive outcome (in Greece) we'll wait, if its a negative outcome we will become more defensive,” said Eric Le Coz, Deputy Managing Director of French asset manager Carmignac Gestion.
Like many big funds, Carmignac Gestion holds no peripheral euro government debt anymore, and has even recently dumped all its holdings of German government bonds or Bunds.
“If we go deeper in the euro zone crisis, for a country which has a sizeable weight in the euro zone, a solution would have to imply more (contribution) from the Germans and an increased burden on their shoulders, which would be detrimental to the assessment of their credit quality,” Le Coz said.
It has also become clear that central banks from Tokyo to London and in Frankfurt stand ready to add act if the Greek vote were to generate the most negative outcome - its exit from the euro zone - resulting in unruly capital flight and liquidity problems for the region's banks.
Despite all the uncertainty over Greece, worries about Spain's banks and signs of splits among European leaders over how to tackle the region's 2-1/2-year-old debt crisis, asset markets have being seeing something of a recovery this month following the very sharp selloff in May.
The MSCI world equity index has posted two solid weeks of gains in June and is up about two percent for the month to date after losing over nine percent in last month.
It's notable that these gains have come at a time when Chinese economic data has been disappointing and signs have grown that the US recovery is flagging.
The single European currency has gained 2.7 percent against the dollar in the past two weeks to be above $1.26, though this is up from a two-year low hit on June 1 of $1.2288.
Gold has also shined and is up around four percent this month at about $1,625 an ounce following a six percent drop in May.
The intensifying euro zone crisis could have an impact across the Atlantic in the other big event of the week - the US Federal Reserve's policy making meeting on June 19 and 20.
Most economist don't expect the Fed to announce any further easing in its already loose monetary policy according to the latest Reuters poll, especially with government bond yields at record lows.
“Here it's a entirely wait and see attitude. What happens to our economy is pretty much outside our control right now because so much hinges on Europe,” said Jeffrey Bergstrand, Professor of Finance at the University of Notre Dame near Chicago.
Asked about the prospect for policy change, Bergstrand, a former Federal Reserve economist, said: “Absolutely nothing is going to happen.”
But a recent poll by Reuters did find that a rising number of economists do expect the Fed will come up with some form of quantitative easing action, if not in the coming week then soon, in response to the weakening jobs market.
Data on housing market activity from the National Association of Home Builders on June 18 and on new residential construction activity a day later could offer a guide to how households are responding to the prospects of lower growth.
In Europe, where a mild recession is already underway, economists will be looking at the first estimates of the June Purchasing Manager's Index for the region and Germany's ZEW and Ifo business sentiment surveys during the week.
Given the all worries over Spanish banks, Italy's debt burden and the problems in Greece it will be a miracle if these show anything but a worsening in the outlook for the whole euro area, including for the giant German economy.
At the end of the week investors will find out if the downturn in Europe and struggling recovery in the US is spreading to China when HSBC releases its flash estimate of the private sector manufacturing activity. - Reuters