Greek election fears snap hope of stability

A crisis is never far away for Greece with new elections and Alexis Tsipras' resignation expected.

Greece national flag
Source: Bloomberg
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Greece may have finally agreed a third bailout programme, yet the selling within financial markets highlights the clear scepticism and concern among investors. No sooner had the Greeks paid their €3.3 billion instalment to the European Central Bank than rumours surfaced that Alexis Tsipras could call snap elections as early as 20 September amid growing dissent among his Syriza party.

However, the truth could be worse than many expected, with rumours that Mr Tsipras will announce his resignation, leaving the Greeks and the bailout programme lurching towards yet another crisis. With former energy minister Panagiotis Lafazanis calling for the creation of a new anti-bailout party, there are many who believe that Greece will never settle and be fully compliant with the terms of the bailout agreement.

Greece wants to remain within the eurozone and receive creditor funding while rejecting austerity. Something has to give. The snap election highlights the fact that even when the deal has been agreed and signed off, stability may never return to Greece as long as austerity is on the cards. Should Mr Tsipras leave parliament, there is the possibility that a more hard-line replacement could take things back to square one.

Mining stocks bounced higher today despite continued selling across the commodity markets which saw Brent crude hit a new circa six-year low.

Regardless of falling commodity prices, there is a growing feeling that the non-stop selling in some of the biggest names in the business has brought about bargain basement prices that are too good to turn down.

Measures taken by China are expected to provide support for the industry in the medium-term and there is a feeling that we are unlikely to be in such dire straits in 12 months’ time. Nevertheless, today’s bounce comes within a wider downtrend and despite the size of the move, nothing has signalled that this marks a bottom for resource stocks.

The widespread selling amid seemingly bullish indicators, such as a relatively dovish FOMC and Greek bailout completion, shows the cynicism and anxiety surrounding markets right now. To some extent the repercussions of the Greek affair have driven chartists to hold a significantly more pessimistic view than was the case not so long ago.

It feels like we’ll need something fairly significant to bring the bulls back into dominance as any upside now comes amid expectation of yet another sell off.

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