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Greece deadline looms

Equities, particularly in Europe, continued to nudge higher, with investors focusing on the fact Greece applied for a loan extension before the deadline. 

Greece
Source: Bloomberg

The latest proposal handed in by Greece will be assessed when leaders meet again on Friday. The fact that European leaders feel the proposal is sufficient enough to meet over has been construed by investors as positive. As a result, expectations are fairly high that an agreement can be reached. While this is only a short-term solution in preparation for deeper negotiations in coming months, it should be enough to alleviate some of the near term pressure investors were concerned about.

There is also a growing feeling that Greece has to buckle otherwise the rest of Europe looks increasingly comfortable to let it go. Whether the risks of such action are indeed not as big as they were in the past remains to be seen, but surely Greek leaders will be wary of this.  Despite the progress, the single currency actually lost ground, with EUR/USD dropping back below 1.1400. This could be as a result of some choppy US dollar trading as some analysts felt the market over reacted to the Fed minutes.

Additionally, heading into Janet Yellen’s testimony next week, some traders just don’t want to get caught out on the wrong side of the greenback. On the data front, US unemployment claims dropped by more than expected and this helped underpin the greenback.

Nikkei at highest since 2000

The Nikkei has been a big talking point recently after Japanese equities managed to trade through 2007 highs. This has seen the Nikkei trade at its highest since 2000 and the index is poised for further gains today. We are currently calling the Nikkei up 0.5% at the open to 18,354 as the momentum continues to ramp up. The fact the greenback recovered some ground against the yen will also help sentiment as exports now look to be driving growth significantly.

On the calendar today we only have manufacturing PMI out of Japan which is expected to improve further and remain in expansionary territory. Of course it could all go pear shaped if Greece doesn’t play out in the manner investors were expecting and the safe-haven trade comes back into play.

Choppy trade for ASX 200

Ahead of the Australian market open we are calling the ASX 200 up 0.2% at 5916. Investors have been relentlessly using pullbacks as an opportunity to buy recently, but the price action has been looking a bit indecisive lately. We are clearly at an inflection point where investors are sceptical about chasing prices higher. I feel we might need a near-term pullback to inspire some fresh buying.

There was mixed trade all round, particularly in the risk space which will result in some choppy price action today.  There were some interesting swing in the commodities space and I feel we’ll continue to see mixed trade in materials and energy plays.

Earnings are likely to continue to play a big role in the market’s performance and today we have Medibank, Platinum Asset Management, James Hardie and Transpacific reporting. Telstra will also be a headline after announcing CEO David Thodey will step down effective May this year. After all the success the telecoms giant has enjoyed under his leadership, this announcement could be a source of weakness in the near term. He has taken the company’s share price from strength to strength (around +108%) and investors had found a new sense of comfort in the stock under his leadership which had been lost in the past.

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