Greece will be in focus for much of this week as Athens needs to make a debt repayment on Thursday. The Greeks have already voted in favour of the terms of the third bailout but other parliaments around the eurozone need to approve it too before it can be signed off.
Equity markets will be nervous until the deal gets the thumbs up from all members. Stock markets have been standing still this morning; we won’t see a move in either direction until we have clarity on Greece, and a lot of the positive sentiment has already been priced in. Even if Athens escapes a financial crisis it could well be facing a political crisis soon with the Syriza party seemingly on its last legs. The latest bailout package caused much division within the party and the leadership could be put to a confidence vote in the coming months.
Shares in Bovis Homes have been hit by profit taking after the housebuilder revealed a record number of completions in the first-half. Bovis’ share price has been rising steadily since 2008, and today’s move provides an opportunity to buy on the dip. The only cause for concern is that costs and net debt are creeping higher, but the jump in dividend has put shareholders’ fears at ease.
The pound has jumped this morning after BoE member Kirstin Forbes stated that interest rates need to be increased well before inflation hits the bank’s 2% target. The ultra-low interest rates in the UK are creating a false sense of security as many businesses and mortgage holders are only meeting payments because rates are so low. But then again, global issues like Chinese monetary loosening could deter the BoE from increasing rates soon.
We are expecting the Dow Jones to open 20 points lower at 17,450 because dealers are fearful the appreciation of the US dollar against the Chinese yuan in the past week will make US exports uncompetitive.
The past two rounds of the US reporting season have been dogged by currency headwinds, and US companies are set to have a similar problems for several more quarters. The devaluing of the yuan has impacted US equities, and even though it now makes the Fed’s interest rate less likely, a rise hasn’t been fully written off just yet.