Greece is looking good for now

Heading into the close the FTSE 100 is broadly unchanged as sentiment surrounding the Greek bailout has improved.

Greek flag
Source: Bloomberg

In a dramatic turn, European equity markets are reacting well to the possibility that Greece’s third bailout may go a lot smoother than the previous two. It is in traders’ instincts to want the market to go up and right now the Greek situation is looking pretty good, and dealers are more than happy to jump on board the bullish bandwagon.

The equity markets have lacked direction since the last time Greece was in the news and traders have become accustomed to the bailout talks. Investors are always sceptical when it comes to Greece as many have been burned too many times, and the nation’s track record has not been the best over the past year five years. The Athens administration must make its next repayment towards the end of the month, but it all seems a bit too easy to just achieve the next bailout and pay off the creditors.

There is a lot of discontent among the creditors, and one side will be forced to concede its principles for the sake of smooth sailing. If the eurozone debt crisis has taught us anything, it is that bailout negotiations run until the last minute, and a deal being struck in advance of the deadline is unheard up.

The Dow Jones is up 190 points, at 17,565, after Stanley Fischer of the Federal Reserve stated there will be no interest rate hike until inflation returns to normal in the US. Traders are taking their cues from Mr Fischer and picking up stock with the confidence that US CPI will stay weak because commodity prices are low.

The US is experiencing mixed demand levels, and the slump in agricultural and energy commodities will keep inflation low for the foreseeable future, and that is a greenlight for the bulls. Gold is having a good spell for a change, and is back above the $1100 level on the back of Mr Fischer’s remarks, but the move doesn’t even begin to make up for the losses the metal  incurred in July, and the heat will be applied to the metal as the September Fed meeting approaches. 

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