This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Traders' wary of Grexit
The London market is hovering around the 6800 level and is making a recovery as the session draws to a close. The trading range hasn’t been too wide over the course of the day, and the UK has been influenced by continental Europe, which is experiencing heavy losses. Eurozone stocks are still being haunted by Greece, and even though the deadline isn’t until the end of the month, dealers are jumping ship well in advance of another round of crisis talks taking off.
Traders have learned their lesson from Athens' behaviour, and rather than sit on the fence and countdown the next series of debt talks, investors are wise to Greece’s tactics and are exiting the stock market now in case it tries to exit the eurozone when the end of June cut off point comes around.
US market in decline since mid-May
The Dow Jones is down 19 points, at 17,830, as the US trading week gets off to a weak start. The US market is following European markets lower and we are in for a quiet week with light corporate and economic calendars. The US market has been in decline since mid-May, and the trend isn’t going to change as Greek uncertainty hasn’t gone away, it has merely been deferred, while the Federal Reserve's next move won't be dovish enough to bring bargain hunters into the mix.
The Fed meeting next week will be of major importance, and the central bank will give little away. Janet Yellen does not want dealers getting too accustomed to rock-bottom rates, but at the same time the economic indicators are there to warrant a hike.
Gold to face sterner tests
Gold is picking up the pieces after last week’s selloff, and the precious metal is struggling to move higher despite the uncertain outlook in the equity market. The strong non-farm payrolls number from the US is a sign of what is to come for metal. Gold has held up relatively well in the second-quarter while Greece rumbled, but the coming months will be the real test as the Fed edges closer to hiking rates.
The sharp decline in Chinese imports has kept the price of copper low, and the red metal will not see any major increase in demand unless the People's Bank of China launch another round of easing.
Euro enjoys Greek absence
The US dollar has pulled a U-turn today in the wake of Friday’s non-farm payrolls, and the euro is benefiting the most from it. The greenback couldn’t hold on to the gains and now it is slowly giving them up; the strong headline from the jobs report distracted traders from the fact that unemployment actually went up to 5.5%, and combined with negative growth in the first-quarter will not justify an interest rate rise from the Fed in the near-term.
The euro is breathing a sigh of relief as Greece is off the radar for now, but the nation’s debt repayments will soon be in the headlines again.