Countdown to Grexit keeps traders tense

Markets tumble as a Grexit is back on the table.

Bank of Greece
Source: Bloomberg

Greek headlines make for unsettled markets

As the week draws to a close we are no better informed as to whether there will be a deal between Greece and its creditors ahead of the 30 June deadline. Market enthusiasm, driven by heightened expectations of a deal earlier in the week, has waned and with the IMF walking out of negotiations, it feels like we are closer to handing in the towel than reaching a satisfactory conclusion.

Rumours have emerged that Greek officials are finally contemplating the consequence of a default, furthering the feeling that negotiations are moving nowhere fast. Ultimately, the fear contagion is more important than Greece defaulting or leaving the single currency and for that reason, there was going to always be an element of unsettled markets when the Greek cloud continued to rumble on.

Ted Baker cooked up a storm of an earnings release, seeing retail sales jump 18.9%. However, it was the outperformance of the ecommerce side of the business which dominated, growing 46.9%. The brand is certainly a quality name and this is being exported successfully to the US, and increasingly Asia, which will likely create good growth prospects going into H2.

Meanwhile one of the top performers on the FTSE 100 was Royal Mail, which has near enough recaptured the sum total of yesterday's losses associated with the government's sale of its 15% in the business at £5. The firm is finally going to be let off its leash in the market and with so much business taking place online, the demand for packages is as high as it has ever been. Thus I am bullish for the firm which will soon be fully privatised which can often lead to greater efficiencies and innovation.

A hawkish Fed expected

US equities have followed the European markets lower, with the seeming increased likeliness that Greek negotiations will go to the wall later this month. With the Federal Open Market Committee meeting impending on Wednesday, we are aware that any major US release will be seen in the context of the interest rate hike timeline for the Federal Reserve. With that in mind, today's University of Michigan numbers provided another compelling argument that consumer activity is picking up strongly, with the survey hitting the third-highest level since the crisis began in 2007.

With consumer sentiment, payrolls and retail sales significantly on the rise, the likeliness is that we will see upgrades to GDP estimates and a more hawkish Fed than was anticipated at the beginning of this week.

The decision from Twitter CEO Dick Costolo to stand down today must have been a hard one, but ultimately it seems right for the future of the company. The business enjoys a loyal user base that most would be jealous of, but without finding a way to monetise that product there is little point in the company being listed in the first place. At current levels, the firm looks ripe for a takeover given the currently depressed share price.

The trend of share buybacks among firms is a result of cheap borrowing costs and a lack of low value high prospect investment opportunities. Thus, I do not doubt that many will be looking at this move as an opportunity to invest in some way.

Demand for energy to see a summer increase

Today saw a Saudi Arabian state oil company official announce that they stood ready to keep up with increased global demand if necessary by increasing output. With US driving season and Saudi Arabian air conditioning units set to run 24/7, demand for energy will likely pick up over the summer.

However, with each spike in prices comes a new bout of producers whose operations become economically viable, leading to increased supply. For this reason, prices between $60-70 are likely to dominate for some time yet. 

Euro weakness to return

The likes of EUR/USD and GBP/USD do not seem to have enough left in the tank to regain recent highs and we are starting to look at a likely scenario of dollar strength coming back into the picture. Ongoing fears surrounding Greece alongside a long-term QE programme point towards weakness in the euro to return at some point and with this week's loss of momentum, we could have seen the top for the moment.

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