FTSE down as Greek saga continues

Heading into the close the FTSE 100 is down 101 points, at 6446, as Greek fears grip London. 

London skyline
Source: Bloomberg

Talk of Greek exit drives equity markets lower

Trading screens are a sea of red as talk of a Greek exit from the eurozone drives equity markets lower. We are now entering what could be the final chapter of the Greek saga, in which the indebted nation breaks free from the single currency and tries to go it alone. The rise of the anti-austerity Syriza party has sent shivers down the spine of dealers as it is well positioned for the election this month.

A victory for the left-wing party does not automatically mean a Greek exit but traders will certainly see it that way. Angela Merkel seems to have accepted Greece’s withdrawal from the single currency as a foregone conclusion, and this tell traders the struggling country has Germany’s seal of approval. 

Oil stocks still under pressure

The Dow Jones is down 181 points, at 17,651, as the US benchmark is dragged lower by its European counterparts. It is a widespread selloff in Wall Street, and only three stocks in the Dow Jones are in positive territory.

Earth-moving manufacturer, Caterpillar, has given up the most ground as questions over global growth point to lower demand for heavy machinery.

It is Groundhog Day for oil, and stocks like Chevron and Exxon have seen a couple of percent shaved off the value of share prices. The relentless battering of big oil stocks is only going to intensify as WTI approaches $50.

Visa has taken 17 points off the Dow Jones on its own, but the share price surge in late December suggests the US retailers had a solid festive season. 

Gold and silver regain safe haven status

Both gold and silver prices pushed higher on Monday as the precious metals regained allure as safe haven status, as markets look to take cover amidst increasing political uncertainty surrounding the eurozone and the growing possibility of some monetary easing from the European Central Bank on top of a pre-existing threat of global deflation.

Gold prices gained 1.38% on the day, having touched a daily high of $1,202 with silver adding 2.79%. 

Adding to the overriding threat of global deflation is oil prices, which continue to move lower with Brent touching a daily low of $53.74, as well as WTI which saw a low of $50.48 - price levels not seen since the financial crisis of 2009.

The continued downward pressure that comes as a solution to the oversupply levels remains unchanged with OPEC unwilling to cut supply, as per its meeting in November. An increasing bull market in the US dollar strength is also another threat to further downside. 

USD posts gains

The US dollar rally has shown no signs of slowing, boosted once again on Monday by investors’ pursuit of a perceived safe haven of which the USD is one. The USD posted gains against the majority of its major counterparts with the biggest gainer seen in the USD/MXN, adding 0.55% on the day.

A continuing bullish dollar trend is likely to continue to add downward pressure on commodities such as oil, and thus casting further doubt over concerns regarding global growth. 

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. 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. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.