Greek political uncertainty resurfaces

Equities have drifted lower this afternoon after the third party in the Greek coalition resigned.

Just as there was a little bit of confidence creeping back into equity markets after the massive slump yesterday, the eurozone crisis reappears.

If there is one thing traders and investors do not like it is uncertainty, and the ability of the Greek government to maintain its austerity programme is now being called into question. It would appear that the Athens administration will still be able to operate even without its smallest coalition member, but it might make decision-making more difficult. If the political situation in Greece deteriorates, European stocks are likely to fall further.

Traders in London sold mining stocks, fearing that China is edging closer to a credit bubble. The overnight borrowing cost for Chinese banks has risen and if lending dries up it could lead to weaker metal prices.

In the US, the Dow is up 80 points at 14,838, despite yesterday’s sell-off following Ben Bernanke’s comments. Investors are a little more confident in a US recovery and that is why US equities are outperforming their European counterparts.

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