European equity markets are rattled as discussions over Greece’s finances rumble on. It’s the last trading day before the end of May deadline for Greece, and traders are not takings any chances. Until we have some clarity about a deal being struck, dealers will always fear for the worst. Christine Lagarde of the IMF stated a Greek exit of the eurozone is possible, and even though only the Greek people can determine their membership of the single currency, the feeling that they are no longer welcome in the club is enough to send stocks sliding.
Traders know deep down that a deal will be reached in the nick of time, but those who don’t have the stomach for it are getting out of the market while they can. Greece has been in revolving door crisis talks for five years now, and Yanis Varoufakis is refusing to bow down to the international creditors.
Mr Varoufakis is content to gamble his country’s future in an effort to get the best terms possible for the Greek people. The ECB secretly doesn’t want to see Greece leave the euro as it could trigger an exodus from the currency union, but at the same time, it must talk tough in order for Athens to stay with its austerity programme.
We are expecting the Dow Jones to open 30 points lower, at 18,090. The fears and anxiety over Greece have never left traders thoughts this week, and this is just the first of three hurdles that the struggling country will have to clear before the summer is out.
The US market is separated from Europe by the Atlantic but the shock waves can be felt in Wall Street, and the prospect of an interest rate hike is also playing on dealers’ minds. Traders have few reasons to buy into the falling US market because the latest Greek saga will last until August, and then the September Fed meeting could be the beginning of the end of record low interest rates.