Greece gives markets a breathing space

An easing of concerns about Greece, China and the Federal Reserve have allowed stocks to move upwards early on in the session.

Greek flag
Source: Bloomberg

Equity markets have rebounded this morning, with evident relief among investors that the Greeks have actually managed to submit their loan application. Now we have to wait for the creditors to decide whether Athens has made enough concessions. Signs of unhappiness at the proposed deal could easily reverse the good feeling seen so far this morning, but for now markets just appear to be pleased that negotiations are underway once again. Having stared into the abyss, there may now be just enough willingness to strike a deal that will take the Greek problem off the agenda for a few months at least.

China has bought itself a temporary respite too, with markets rallying on news of government instructions to major shareholders to hold off on share sales. If this is followed up by fresh liquidity measures then further panic selling may be averted, but the turmoil of the past week is a salutary reminder that the still-immature Chinese equity market is not an area for the faint-hearted.

Primark sales continue to drive performance at Associated British Foods, with a return to form here driving a 3% rise in the share price today that has propelled the firm to the top of the FTSE 100. However the warning about currency impacts on the sugar division will reinforce calls for ABF to spin off Primark and allow this high street success story the freedom to ramp up expansion plans abroad.

Fed minutes last night showed that some policymakers were still concerned about a premature rate hike, and with soft employment data now public knowledge their fears appear justified. Greece got a mention even here, a sign that the US is deeply concerned and frustrated that the eurozone has yet to solve this particular Gordian knot.

With a September hike now a diminishing possibility once again, the dollar looks set to weaken, providing space for an equity rally, especially if the weekend brings a Greek deal. Ahead of the open, we expect the Dow Jones to start 122 points higher at 17,637.

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.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.