ADP recovery pushes US indices higher

Markets shrug off a lack of progress in Greece to make up for lost ground.

Source: Bloomberg

Grexit in traders' minds

With Sepp Blatter's bomb scare and Mario Draghi's confetti dump, European press conferences have taken on a bit more of an unpredictable nature recently. However, today's European Central Bank announcement went without a hitch, with Mr Draghi painting a picture of monetary policy stability in the face of the rising CPI and employment figures released this week.

Greek worries dominate investor sentiment, with the country now just two days away from the €300 million IMF payment which becomes increasingly unlikely to be paid on time. Mr Draghi's admission of a likely ECB haircut on Greek debt could be one of many concessions in what appears to be a fruitless relationship between an anti-austerity Syriza and its pro-austerity creditors. While both sides stand to lose, neither wants to give ground and set a dangerous precedent. And so, we drift towards default with Syriza on one oar and the eurozone on the other, both unwilling to do what it takes to turn the boat around.

Despite today's shocking UK services PMI number, the markets have taken a moment to take back some of those losses from earlier in the week, with the DAX, CAC and FTSE 100 rising on the day thanks in part to tumbling eurozone unemployment and strong retail sales.

Examples of immediately positive mergers are few and far between nowadays, yet despite this Dixons Carphone has brought impressive results to the fore, with a 13% rise in sales coming just one year on from the merger of two of the UK's most well known high street names. While much of the gains in profits have come from substantial growth in sales of Ultra HD television sets, the long-term picture looks rosy too, with the firm able to capitalise on the 'internet of things' given the product range of the newly merged company.

Dollar General enjoys positive earnings report

US equities took a leg higher this morning, resisting an initial selloff at the open to move back into the green, matching its European counterparts. For those looking forward to Friday's jobs report, today provided the privately calculated ADP number, coming largely in line with expectations by rising to 201,000. While the validity of the ADP figure as a reflection Friday's headline number is a bone of contention, today's figure does point to an economy which is moving in the right direction following a tough winter period. Ultimately, much of the US centric trading is determined by ongoings in the eurozone, which has the potential to blow up later this week. Thus today's respite is likely to be a breather more than anything in a market which doesn't know whether it's coming or going.

Dollar General saw an outstanding earnings report today, with the low cost retailer reporting gains in gross margin, net income, sales and same store sales in Q1. Much like the trend in the UK, the rise of low cost fixed price stores is likely to outlive the recession which drove many to their doors in the first place. With plans of further expansion build on the already 11,999 stores in the US, the markets are beginning to wake the share price from the slumber it has been in for the past two months.

Further loss for oil possible

US crude oil inventories fell for the fifth consecutive week, this time by 1.9 million barrels which gave a temporary boost to both WTI and Brent prices. However, with a total of 477.4 million barrels in storage, current inventories numbers remain near an 80-year high for this time of the year.

This supply side of the argument calls for more downside in crude prices and when considering the positive relationship between prices and output in the US, we are likely to find some sort of equilibrium at some point. With OPEC largely expected to remain steady with production on Friday, there is the potential for further losses to come for the black stuff.

EUR/GBP and EUR/USD spike higher

The euro continued to outperform its peers today, with EUR/GBP and EUR/USD both spiking higher. Given the likeliness of a Greek default later this week, there is a clear possibility that markets are seeing a possible Grexit as a positive for the euro.

When looking at the ability of GBP/USD to keep its head above the water today, despite a shockingly weak services PMI number, it is worthwhile bearing in mind that the tail could be wagging the dog, with US dollar weakness driving currency markets more than anything today.

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