Tentative markets await Eurogroup meeting

The tone in global markets has remained cautious all day, with the FTSE 100 down 20 points as the session heads to its close.

City of London
Source: Bloomberg

Varoufakis cuts a lonely figure

All of today’s action, what little there has been of it, has taken place in the shadow of the Eurogroup meeting today. Finance minister Yanis Varoufakis goes into the meeting almost entirely without allies, Germany having lined up a formidable coalition to oppose any changes to Greece’s current financial status. Both sides are firmly entrenched, and the weary truth of the matter is that the eurozone, financial markets and investors will all need to go through several rounds of negotiation, before time pressures finally force some kind of compromise.

Weaker commodity prices, which have already been hit by Chinese data this week, took a knock again as the dollar rose on caution ahead of developments in Europe. As a result the FTSE 100 found itself to hold above 6800 yet again, while on the continent gains in markets were fleeting at best.

Redrow’s ebullient update this morning has given housebuilders a lift today, pushing Taylor Wimpey and Persimmon 3% higher. The delay to an interest rate hike in the UK provides extra time for the UK’s latest property love affair to run on a bit further. 

Slow growth claims offest by dividend boost

Aside from Apple, which seems to go up regardless of conditions around the world, US markets looked shakier as Greek worries saw indices reverse some of yesterday’s gains.

PepsiCo followed Coca-Cola’s recent move higher with its own gains, despite a drop in profit for the final quarter. A warning about slowing growth that cited the stronger dollar (likely to become a major theme in the coming quarter) was offset by a boost to the dividend.

Despite yesterday’s better session on Wall Street US stocks have exhibited the same loss of momentum that is afflicting Europe. Greece and Ukraine are the key culprits, although the gradual end to earnings season will also make the going trickier, at least until European Central Bank quantitative easing kicks in. 

Brent can't hold on to $58

Those expecting a continued bounce in crude will have been dismayed to see the latest dive lower. With Brent having failed to cling on to the $58 level, a retest of the January lows has become the most likely eventuality. A deterioration in risk appetite caused by the Greek woes leaves oil looking overextended after the strong run we have seen in the past two weeks.

Dollar buying has driven down gold once again, with the $1230 level lost once again. 

Eurogroup meeting looks to continue over long period

The euro has been able to hold its ground for the time being, but this sanguine approach to the Eurogroup meeting will not last should the finance ministers depart without an agreement that will tide Greece over for the time being. It seems difficult to imagine the meeting coming to a quick agreement, and comments from the Eurogroup chairman Jeroen Dijsselbloem reinforce this.

Pre-Inflation Report nerves saw the pound knocked back from $1.53, ahead of a report that will point to the continuing threat of deflation taking hold in the UK. 

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