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Markets still believe deal can be completed
Today’s session has been like the good old days of the 2010-2012 eurozone crisis. Most of us had forgotten what those times were like, but we had an effective reminder today as first one headline and then another sent markets racing higher before immediately diving to earth. During the morning the skies seemed to clear as Greece submitted its proposal for a bailout extension, apparently capitulating on many of the key points. Such a climbdown raised hopes that a deal was on its way, and the decision to hold a Eurogroup meeting on Friday reinforced the sunny disposition of equity markets.
It was left to a German to darken the horizon, as an official said the request failed to offer a real solution. Whatever happens, we can be sure that talks will go right down to the wire. Things seemed to stabilise during the afternoon, with investors reasoning that Greece’s conciliatory approach could win them friends. It’s clear that markets still prefer to believe a deal will be done, rather than contemplating the alternative.
Babcock joined Centrica on the list of heavy fallers this afternoon, as the defence firm was heavily punished by investors for missing out on a key contract, while the UK gas supplier has fallen out of favour by being the latest utility to slash its dividend.
NASDAQ hits 15-year high
Whatever ructions are afflicting Greece had had little, if any, impact on the tech sector this afternoon, as the NASDAQ hit a 15-year high, closing in on the 5000 level. Flush with cash, the tech industry looks to be fairly capable of weathering any storms prompted by rising US interest rates, making comparisons with 1999 look weak at best. This is an area that seems to be fulfilling the potential it seemed to offer so long ago.
Meanwhile the S&P 500 clung on near the 2100 level, with some profit-taking still haunting US stocks. Despite this, optimism regarding a Greek deal is still present, with investors as ready as always to pounce to shore up indices as and when required.
Gold struggles to move past $1210
Oil has slipped for a second day in a row, as momentum to the downside continues to build. Inventory data merely confirms the general shift in positioning in the market, as speculative longs are trimmed and traders reposition themselves for a fresh move lower.
Gold is struggling to move beyond $1210, but yesterday’s bounce from $1200 caught the interest of those watching the rising trend off November lows, which will provide fresh forward momentum – particularly if the Ukraine situation takes a turn for the worse.
Dovish tone to Fed minutes
Yesterday’s move in GBP/USD has undergone a period of consolidation, but the slightly more dovish tone of the Federal Reserve minutes means that there should be more upside in this currency pair. Tomorrow's UK retail sales are forecast to show steady year-on-year growth, and with buyers stepping in today around $1.54 a strong reading on consumer spending should provide further rationale for sterling strength.