Greece's bluff called

Even the most skilled politician would struggle to label this morning’s actions as anything other than complete capitulation from Greece. 

Greek flag
Source: Bloomberg

The Greek populace must be feeling even more shell-shocked than last week as they have woken up to Syriza having had its bluff called, folding to a series of harsh demands. Patience towards Greece and its aggressive haggling tactics has been eroded over the past few weeks, and a number of measures were subsequently added to the criteria that the country will need to meet. These new measures have led the markets to ask themselves just how few friends Greece currently has – or probably more likely, how few nations are willing to stand up to Germany. The early morning relief rally has weakened as once again the realisation that the Greek parliament has yet to ratify the deal sinks in.

Investors, meanwhile, remember that making assumptions about Greek politics has been a particularly precarious game of late.

From the sublime to the ridiculous, traders have watched with morbid curiosity as Chinese regulators have imposed draconian measures to ensure that the Shenzhen index stops falling. A combination of banning short-selling and the threat of jail time for those found to be flaunting this has seen few traders looking to do anything other than invest.

With the goings on in both China and Europe, US markets have found themselves in the unique position of being viewed as a calm pool of sanity by global investors, who are left wondering what is coming next. With all the chaos outside the US it is hard to believe that this week’s testimony from Fed chair Janet Yellen will be any different from the holding pattern seen in previous appearances.

Regardless of other regions, US investors could well be tempted back into the US equity market as earnings season cranks up. The bar for the latest corporate reporting period has been set at particularly low levels, almost ensuring a steady flow of expectation-beating figures throughout the coming  weeks.  

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