The on going talks between Greece and the Troika continue to prevent the markets from making ground to even fresher highs.
Whilst the deadline for a resolution to the talks has been continually dragged through the mud, the other looming deadline of a possible default date has got closer. Unfortunately for the Greeks they are in an impossible position being asked to accept more and more austerity in order to bring their deficit down but killing off any prospects for growth at the same time. The measures being imposed upon them by the very people that they rely on for their next tranche of bailout funds are choking off any prospect of growth for many years to come.
The problem is that Greece has been so uncompetitive for years, even before it joined the euro and has had a reputation for poor tax retrieval and dishing out state funds to the bloated state sector just turning up to work. Without reform this small country that is at the epicentre of the global sovereign debt crisis will find it even harder to ever return to growth. The greater the pain now, the more chance of a return to competitiveness and prospects of a better recovery into the future.
After the mega gains of last week markets are just pausing for breath at the moment as a little froth is being taken off the top this morning. The FTSE is just a few points lower under the 5900 level that it only just closed above last week. The euphoria from the non-farm payroll figure which sent the markets skywards on Friday just seems to have died out as the focus goes back onto Greece.
Things are very quiet today on the economic data front with only German industrial orders later this morning worth keeping half an eye on. The number is due to rise, but won’t be enough to avoid a quarterly decline for Q4 of last year.
The result of last Friday’s NFP figure gave the dollar a short lived rally, as traders suspected the increase in jobs would encourage the Fed to ease its monetary policy. This morning the focus is back to the eurozone and Greece again attempting to reach an agreement with their creditors. In line with equities, it is risk-off and the single currency is down against the dollar to 1.3060. Until we see some optimism with regard to the Greek debt situation, the uncertainty may provide for further falls in the euro.
The euro’s weakness this morning is affecting its relationship with sterling too as GBP/EUR continues to hold onto the 1.2000 level with the pair at 1.2062 at the time of writing. Regularly in the past sterling has lost momentum against the single currency around this area, but not seemingly this time. Pressure continues to build against the euro as for some reason a few currency traders find sterling a slightly safer haven than the euro.
After the surprisingly better than expected US NFP figure, investors started banking their profits in gold and reinvesting into riskier assets, happy to ride the wave of optimism that was engulfing the markets. Consequently, the precious metal lost 33.2 bucks, bringing it down to 1725.8 meaning that the week’s gains were wiped off and thus changing the outlook to neutral. At time of writing, the yellow brick trades down further still at 1724.9, in line with weaker equity markets and since the break below some near term technical levels, a few of the bulls are having their nerve tested.
The pessimistic views relating to the energy sector that had been rife in the markets were soon reversed on Friday after the US employment data came out. The rise of 243k jobs was much higher than the expected figure of 150k, which pushed the unemployment rate lower to 8.3%, the best figure since February 2009. This brought investors to the belief that demand will be raised and in turn, caused a hike in the price of a barrel of oil. Brent got itself back above the 114 level but this morning it’s struggling to hold onto that ground as it trades at 114.00.
