Greece drama continues to sap morale
As the summer goes on, the Greek headlines become more dramatic. Perhaps it’s the rising temperature of the European capitals, or perhaps blood pressures are on the rise across the continent, but the situation appears to be heading out of control. Officials have even suggested a last-minute summit for the weekend, which is one part of the eurozone crisis playbook that hasn’t had an airing for a good few weeks.
While this does cue up excitement for the end of this week and the beginning of the next, it leaves us no further along the road to a solution. Greece has even mooted that it might defer the IMF payment due on 30 June, itself a deferment from earlier in the month. And thus the saga goes on, with the added concern of rising Italian and Spanish yields. Investors had assured themselves that contagion was a distant memory, but this development shows that there is still a fear that one domino could follow another in the event of a Grexit.
In London, Ashtead shares slumped after the company reported full-year figures; despite a good performance and expectations of more to come the shares have paid the price for being one of the major momentum stocks of the past five years. A 3% decline hardly suggests the tremendous surge has come to an end, and it will more than likely afford the chance for more investors to hop on board.
US markets await Fed decision
‘Turnaround Tuesday’ seemed to kick in on Wall Street this afternoon, although it has so far only recovered a fraction of recent losses.
The Fed meeting is now underway and this will take centre stage as we head towards tomorrow’s decision, statement and press conference. Thus the two recurring market themes, Greece and the Fed, find themselves sharing financial headlines.
Building permits figures were better than expected, but housing starts were marginally weaker, allowing both sides in the US rate debate to cherry pick the data as needed.
Gold and silver both in retreat
The drop in gold and silver this afternoon indicates that there is one area of the market that is expecting a fairly confident assessment of the US economy at tomorrow’s Fed statement. Both metals were in retreat, with the implication being that Janet Yellen will signal a steady journey is underway towards the first US rate increase in years. With rates on a rising trajectory, albeit a slow one, gold's potential upside looks capped, to say the least.
$1.13 hinders euro's progress
The euro has seen its gains against the dollar constrained by the $1.13 level, with poor readings on Germany’s ZEW sentiment indicator underlining how the Greek crisis continues to sap morale. However, for the time being the downside in this currency pair has been limited, with buyers stepping in around $1.12. A dovish Fed tomorrow, admittedly an unlikely eventuality, would see EUR/USD break higher, potentially sending it back towards the May highs around $1.14.