When stock markets fail to rally in the wake of a dovish Fed then you know you’re in trouble and as if to reinforce this European stocks look set to post their worst weekly fall this year, as well as opening sharply lower this morning, while US markets finally buckled under their own weight yesterday with the S&P500 posting its worst daily fall since February 2014, in the process giving up its gains for this year, as well as closing well below its 200 day MA. In the course of this month we’ve seen a host of global indices fall below their 200 day MA’s suggesting the recent bull market may be about to roll over, and if the Shanghai Composite finally succumbs today then things could well get even more interesting in the coming days. Concerns about the prospects for global growth, particularly in China, where we saw a six year low at 47.2 in manufacturing PMI earlier this morning, the domino effect of currency devaluations, and collapsing oil prices appear to be keeping investors on the fringes. It would also appear that those that are involved are taking the opportunity to lock in what exposure they do have, as European markets look to open well below last night’s closing levels this morning. Depending on your interpretation of this weeks Fed minutes and the various other interpretations of them, the events of the last two weeks now presents the Fed with a bit of a problem, a problem largely of their own making as the window of opportunity for raising rates continues to get ever smaller. We’re told the US economy can withstand a rise in rates, yet recent price action would appear to suggest that investors are far from convinced. If Fed officials were starting to harbour concerns about the prospect of hiking rates next month, then the last two weeks of stock market declines might well serve to reinforce those doubts, and give them significant pause. Given the divisions opening up with Syriza’s ranks it shouldn’t have been too much of a surprise to most when Greek Prime Minister Alexi Tsipras announced his resignation last night and in the process signalled the prospect of new elections on the 20th September, though we could see the fragmented opposition attempt to try and form some sort of unstable coalition in the short term. This course of action more or less became inevitable when he was unable to pass the latest bailout reforms with more than the required 120 votes he needed from his own party, losing his majority in the process. Having secured €23bn of funding to help pay the ECB yesterday and also help recapitalise the banks the path now remains clear for the still fairly popular Greek Prime Minister to refresh his mandate. In throwing the bailout agreement open to the wider population for a vote, Alexis Tsipras is betting that despite the onerous terms, which were far worse than the terms rejected in the referendum, that the Greek populations desire to remain in the euro will protect him from the harsh glare of history, and the reality that he was unable to deliver on his promises, that helped propel him into the hot seat in January. While the decision to have a new vote is likely to increase political uncertainty in the short term, a fact acknowledged by Moody’s the ratings agency, the hope is that the more dysfunctional members of his government will get pushed to the side-lines. The hope would then be that any new government will be able to have a much freer hand when dealing with the creditors, though whether this bailout will be any more effective than the previous two remains a significant unknown. Recent economic data from Europe has almost seemed secondary in the context of overall sentiment right now, though in the scheme of things it still remains important despite evidence of a slowdown in the second part of this year. We get the latest preliminary August manufacturing and services PMI data from France and Germany this morning, which aren’t expected to be that much different to the final July numbers. Manufacturing is expected to remain on the weak side with France at 49.7, and Germany at 51.6, while services are should come in slightly stronger at 52 for France and 53.7 for Germany. UK Public sector borrowing for July is expected to see a repayment of £2.8bn, and improvement on the £8.6bn deficit in June. EURUSD – the euro continues to push higher, taking out the recent highs at 1.1215/20, which would suggest a move towards the 1.1400 level could well be next. In the medium term the 200 day MA at 1.1345 is likely to be a barrier. On the downside pullbacks are likely to find support at 1.1120 and 1.1050. GBPUSD – we’re still not seeing much of a dip at the moment which continues to validate the possibility of a move towards 1.5820. Only a move below the 1.5600 area delays this prospect and argues for a move back towards 1.5530. EURGBP – yesterday’s push above the 0.7120 level opens up the prospect of a move towards the 0.7180 trend line from the May highs, and a break of which could well open up a move towards 0.7230, while above the 0.7120 level which should now act as support. USDJPY – yesterday’s fall below the 123.75 area now opens up the prospect of further declines towards the 123.00 area initially and then 122.30. A move back above 124.00 stabilises and argues for a move back towards 124.80. Only above 125.90 argues for a move towards 127.20. CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.