This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Greece makes repayment to IMF
There are no prizes for repaying your debts, and that is exactly what Greece is experiencing right now as the debt-laden country repays the IMF €750 million. The repayment by Greece is good news for all involved but you wouldn’t think it by looking at the markets' muted reaction, however if Greece welshed on its agreements then the markets would reflect it.
The move by Athens can hardly been seen as a victory, and the money just keeps going around the circle between the IMF and Greece. Today’s repayment is by far the smallest that the nation must make within the next few months.
The mining sector is keeping the FTSE 100 ahead of its continental counterparts, and the interest rate cut from China has spurred demand for the commodity stocks. The aggressiveness of China to loosen monetary policy indicates it is not afraid to do whatever it takes to prop up the economy, and this will be favourable for mining stocks which have seen sharp decline in recent years.
US markets fail to kick on
The Dow Jones is down 15 points, at 18,175, and the US market is still meandering between a 60-point range. The US was given a jolt higher on Friday on the back of the jobs report but since then it has been stuck in limbo.
The unemployment data was overall quite positive, and it set the foundation for an interest rate rise from the US this year, but it wasn’t so impressive that a rate hike is around the corner. The downside risk is too great to buy into the market now, and US traders are looking to Europe for a signal over its financial health - the comments about high valuation of stocks are giving dealers cause for concern.
Price of copper cools, gold set to rally
Gold has attracted a few traders as Greece rumbles away in the background. The market isn’t overly frightened by the Greek situation but the precious metal is still providing a safe haven to some dealers. The fact that gold is sub-$1200, and that there is a possibility that Greece could go bust any day now, is an indication of how thick-skinned traders have become, and if gold can’t obtain a sizeable rally right now when will it ever?
Copper’s price has cooled today as dealers dismiss the interest rate cut from China, but the metal has been in an upward trend since February and today’s dip will provide a good buying opportunity for those who are not already long. Beijing’s commitment to keeping its growth rate high has been welcomed by the minerals market, and it will coax some hesitant traders off the fence.
Euro remains under pressure
Greece has somehow managed to repay the $750 million to the IMF, but the euro couldn’t care less, and the currency is still under pressure. Greece may have survived this round with the IMF but it will have much larger repayments over the course of the summer, and these will prove to be more difficult hurdles to clear.
The pound started off this session on the wrong foot but sterling is getting its second wind after the BoE kept its policy unchanged. GBP/USD has pushed through the election night high and is currently at its highest level since February. After a short-lived correction in the wake of the election the pound is targeting its year-to-date high.