Equity markets appear to have recovered their equilibrium this week despite the uncertainty surrounding the future of Greece with both US and European markets posting strong sessions yesterday, and Europe looking to open higher this morning
, and the DAX
at record highs.
Amongst the reasons given for the rebound in confidence was the signing of a new peace deal between Russia and Ukraine
due to take effect from February 15th, though why markets think this deal should be any more successful than the last one is rather puzzling. The phrase clutching at straws springs to mind.
That being said investors also appear confident that a Greek disaster can also be averted
on unconfirmed reports that German and Greek officials were working on a compromise in Brussels as both sides looked to soften their positions, before the Eurogroup talks which are scheduled to begin on Monday.
The sticking points though are likely to remain the size of the debt and any financing needs beyond the end of this month
, which means anyone hoping for a quick resolution are likely to be disappointed.
This is especially so given various comments from messrs Juncker, Dijsselbloem and especially German Chancellor Merkel
late last night, after their various meetings with Greek PM Alexis Tsipras. Her comments that Greece must stick to its current commitments
suggest that there are going to be a lot of hard yards and sleepless nights in the coming days, before we get anything close to a solution.
Back in the US the latest economic data was somewhat disappointing
, with retail sales sliding much more than expected in January, despite the apparent stimulus effect of lower fuel prices.
A combined slide of 1.7% over the two months since November
begs the question as to why, despite the strong rebound in the US labour market, US consumers remain reluctant to go out and spend money, despite falling gasoline prices.
The fact that yesterday’s numbers were so disappointing does raise the prospect that despite the improving labour market a possible Fed rate rise might be more distant,
and that generally tends to benefit stocks, and undermine the US dollar.
It is events in Europe that once again take centre stage as we end a rather turbulent week with the latest Q4 GDP numbers from France, Germany and Italy
It probably won’t be a coincidence either that we could see some improvement in the headline numbers, as the effect of a lower euro and oil prices start to take effect in some of the economic numbers, and this before the ECB’s QE program has even started.
Both French and German GDP numbers
are expected to show a decent rebound from a disappointing Q3 with a rise of 0.3%
Italy is set to disappoint
once more with another contraction of 0.1%, replicating its performance in Q3, and meaning that the economy will have contracted for four quarters in succession.
The broader EU measure of GDP
is expected to show an expansion of 0.2% for Q4.
– our rebound towards 1.1535 could well be starting to build some momentum but we need to push through 1.1420 to reinforce this view. Range support remains down near 1.1270, with larger support at the 1.1205 level.
– the move higher in the pound appears to be unfolding with yesterday’s break through 1.5300 as we look to head towards 1.5500. Any pullbacks need to stay above the 1.5280 area for this to unfold. A move below 1.5200 could well see a retest of the 1.5000 lows last week.
- the euro continues to drift lower with another marginal new low at 0.7370 before again rebounding back above 0.7400, which means the prospect of a return towards last week’s high at 0.7590 remains. Interim resistance sits at 0.7460 and while below here the downside pressure looks likely to be maintained.
– despite our break higher we got a failure and sharp reversal at the 120.50 level which throws the potential for further upside in doubt. A sustained move below 118.70 could well be the catalyst for a return towards the 117.00 level. Yesterday’s low at 118.50 will no doubt be a key level in terms of the next move.
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