UK markets take a turn for the worse

Heading into the close the FTSE 100 is 20 points lower, as the optimism of the morning gives way to selling.

London
Source: Bloomberg

Greek situation continues to unravel
Having looked positive this morning, thanks to a greater degree of calm in bond markets, the picture looks very different this afternoon. It appears eurozone markets are still in a testy mood after the bank holidays yesterday, with thinner volumes conspiring to produce a rapid selloff that has left many gasping for breath.

The situation in Greece appears to be falling apart by the hour, as the government comes under fire for evading pre-election promises. Given the pressure being put on Prime Minister Tsipras by both his party and the eurozone, it was always unlikely that he could achieve the tricky goal of pleasing both sides.

It had looked like a firm end to the week for stock markets,  supported by Mario Draghi's commitment to keep the taps of eurozone QE on at full pelt. Markets appear to be much harder to please now than a few months ago, with most investors still inclined to reach for the 'sell' button rather than keep buying into an equity rally that seems to offer less upside with each passing day. bwin.party digital shares were surging after the online gaming firm confirmed it was in discussions with suitors, which enlivened a day that was, SABMiller aside, fairly light in corporate news.

US markets dip lower
Markets continue to be rattled by poor US economic data, with today's industrial production and consumer confidence figures all coming in below expectations. Confidence has been hitherto strong among consumers, but it looks like the recent downturn in job creation and the rising oil price have taken some of the fight out of Americans.

Fed minutes next week will therefore be crucial in determining the outlook for the early part of the summer - if the world's most important set of monetary policymakers still seem inclining to a 2015 rate hike then equities could take another beating, while the US dollar aims to recover some of its lost ground.

Gold rally may be short-lived
Gold has seen a surge during the afternoon, lifted by the poor figures from the US. Equities seem convinced the Fed will not be shaken from its course, but the idea that Janet Yellen and co will have to row back on their move to hike rates appears to have a greater number of adherents among gold traders.

Nonetheless, the area around $1220 has marked the highpoint of gold bounces so we could see this rally fizzle as the new week gets underway.

GBP/USD continues its move higher
The dollar took a pounding this afternoon, as the aforementioned data was followed on by Goldman Sachs' decision to downgrade US GDP forecasts for the first quarter. This seems rather gratuitous, but nonetheless justified, and it seems Q2 could be just as bleak if a turnaround in the general tone of figures is not seen soon. GBP/USD moved above $1.58, turning round rapidly from a weak morning session, as the certainty of solid austerity policies continues to outweigh the notably negative tone we had earlier in the week from Mark Carney and the Bank of England. 

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