Late Greece deal sees equities rally

Confirmation that Greece, late last night, finally agreed to play nicely with the rest of the eurozone nations has seen equities start the day in bullish mood. 

Greece flag
Source: Bloomberg

Have the Greeks at last seen sense or was this a fight too far? Eurozone member nations' patience with the Greek government and its combative style of diplomacy appears to have run its course. Last night’s verbal wrist slapping has finally seen Syriza agree to address more of the internal issues that have been left unchecked. 

Once again the European Central Bank has been forced to top up Greek banks’ emergency funding as the flight of cash reaches worrying levels, with €350 million withdrawn on Wednesday alone. Fears over defaults have increased with Greek sovereign ten-year debt yielding twenty times their German counterparts, as the investment community has clearly reacted to the increased risks. Even though there are understandable worries surrounding the eurozone, the benefits of the quantitative easing scheme have outweighed these issues and driven equities higher.

Lloyds has agreed terms with Spain’s fifth largest bank, Banco Sabadell, for the acquisition of its remaining 40% holding in TSB, a company that Sabadell values at £1.7 billion. Although the two parties have come to an amicable agreement, banking regulators will need to give this their seal of approval. Considering the likely consequences of the big four UK high-street banks being joined by a fifth, and the increased competition that would follow, this looks more likely than not.

Tullow Oil has secured $450 million of further funding from its current lenders as it prepares for its last day of trading in the FTSE 100 before being replaced by Hikma Pharmaceuticals

The on-off merger between Lafarge and Holcim had left CRH in limbo, but the latest twist appears to suggest that everything is back on again, much to the benefit of the building materials company and reflected by the 4% increase in the company’s share price.

Outside of the normal reporting season Nike posted its third-quarter figures, beating analysts’ expectations and squeezing shares 4.5% higher in out-of-hours trading. One note of caution that was raised by the CFO was the implications of the strong dollar and the negative effects it would have on the future quarters. This signals the first of the major US corporations to use ‘currency headwinds’ as an excuse.

Following Wednesday’s speech from Janet Yellen, we will also be hearing from Federal Open Market Committee members Dennis Lockhart and Charles Evans as they are both given opportunities to elaborate at separate functions.

Ahead of the open we expect the Dow Jones to start 75 points higher at 18,034.

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