Greece's shadow looms over eurozone

Heading into the close the FTSE 100 has fallen below 7000, as Greek worries and poor US trade figures spark a wave of selling. 

Alexis Tsipras
Source: Bloomberg

Greek repayment responsibility sparks fresh selling

The day has seen the FTSE fail to keep most of its gains, which can be partly attributed to the nearness of the UK election, but the real culprit lies over in the eurozone, where the familiar spectre of Greece has caused markets on the continent to move into reverse. Yesterday’s low-volume bounce has run its course and given way to fresh selling as investors once again wake up to the sheer scale of Greece’s repayment obligations. Combine that with a downgrade to growth forecasts for Greece and once again we have the recipe for another panic about the country’s inability to live up to its requirements.

HSBC shares were unable to hold on to its post-results rally as the chairman once again turned his fire on the UK government. A warning about an end to the rising dividend was enough to send the shares into a tailspin, leaving them languishing near the bottom of the index.

S&P 500 close to all-time high

The rebound in US indices ran into a soft patch thanks to trade data that underlined how weak recent US economic data has been. In years gone by such bad news would probably have given indices a lift on expectations of fresh liquidity injections, but recent Federal Reserve policy does not seem to be unnerved by the downturn in data.

The prospect of life without an activist Fed still has the capability to scare, but with the S&P 500 still within easy distance of all-time highs today’s downward move still seems like a blip. The real worry is still the poor performance of US firms in relation to revenue targets. A repeat performance in the coming quarter will be even more concerning, especially with the growth outlook still weak thanks to a strong dollar and rising oil prices.

Brent up by over 2.5%

Speaking of rising oil prices, today’s pullback in the dollar allowed commodities some breathing room, which oil traders gladly seized with both hands, pushing Brent up by over 2.5% and WTI by more than 3%. Most traders will view the rise with a more cynical eye than the Saudi oil minister, who sees a divine hand at work, but there is reason to be concerned about what the rebound in oil will do to economic growth around the world.

It will at least buff central bank inflation forecasts, making these sages look better at prediction, but spells trouble for a global economy that is already struggling to maintain the pace.

AUD/USD higher thanks to retreat in greenback

Today’s bounce in the Aussie will have come as a shock to any expecting renewed weakness following the RBA rate cut last night, but the accompanying statement offered some crumbs of comfort regarding the outlook for the Australian economy, and thus room for optimism.

AUD/USD lurched higher following the US trade balance data thanks to a retreat in the greenback, but the real test will come in sustaining gains beyond $0.79. The dollar’s troubled afternoon meant that sterling was able to shrug off weak construction figures from this morning, continuing its stabilisation operation around the $1.51 mark. 

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