Greek woes weigh on FTSE

In mid-morning trading the FTSE 100 is in the red as Greek fears are back on the table.

Source: Bloomberg

Greece has repaid €200 million to the International Monetary Fund, but the deal for Monday still hangs in the balance. The European Central Bank has increased the emerging financing facility for Greek banks, and the market is viewing this as a sign of weakness. Even though the Greek banking system has no shortage of funds, the Athens administration is in a very different situation.

Even if Greece somehow manages to broker a deal by Monday, the indebted nation will have to make considerably larger repayments in the coming months and if the Greek government is having difficulty meeting Monday’s deadline what are the chances it will survive the summer deadlines?

London has been hit hard by Greek woes, but eurozone equity markets have been hit harder as they have more exposure to the root of the problem. Sterling will be subdued as voters go to the polls today, and with no clear outcome in the pipeline for today’s election dealers will be avoiding the pound like the plague. Gilts have a gloomy outlook for today’s session too.

Morrison's has had a poor start to the financial year as first-quarter revenues missed exceptations. The struggling retailer is in fourth place of the UK supermarkets, and today’s update hasn’t done it any favours. The company is the worst of a bad bunch, and as it gets stuck into the price war its casualties will only rack up. 

We are expecting the Dow Jones to open 80 points lower, at 17,760, as Janet Yellen’s comments about equity high valuations are hanging over the market. Ms Yellen wasn’t trying to spook the stock market, but was reminding traders that interest rates will not remain rock bottom for ever.

The Federal Reserve is fully aware that ultra-low interest rates have been a huge factor behind US equities hitting all-time highs this year, and the last thing the US central bank wants is a crash when rates start to rise. 

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