A Greek deal now looks real enough to touch

Heading into the close, the FTSE 100 is 60 points higher as markets rally ahead of a make-or-break weekend for Greece.

Source: Bloomberg

The week is ending on a sunny note in London, and not just weather wise. All the problems of the past week appear to be slipping away. Chinese equities have bounced, Greece seems to have bowed to the inevitable and acceded to its creditors’ demands, and even the dollar is moving lower thanks to diminishing fears of a US rate hike. Taken together, this trifecta of problems has bedevilled markets for weeks, but they seem much less concerning this afternoon. Only one of them, Greece, is likely to disappear for any extended period, and there is still time for a deal to fall apart, but markets seem to think that Monday will dawn with Greece still in the eurozone.

European markets have been the  most enthusiastic in their reception of the news, but this could easily imply that Monday will see little excitement, with the news already being priced in. Traders should keep a weather eye on IG’s Sunday markets for an early indication of how things may pan out next week.

Alexis Tsipras looks to have given way on many of the sticking points of the past week; he may still try to present any deal as a victory for Greece, but the real truth is that the creditors have prevailed. Athens can hope for a discussion on debt relief, but the past week has shown that this will be done on terms dictated by the eurozone and the IMF, with Athens allowed only a small say.

Turning to China, the government’s measures are reviving confidence that the bull market can be resurrected, while in the US the Federal Reserve’s cautious tone from Wednesday continues to hobble the dollar and give equities room to push higher. Next week’s tone will be dominated by what happens in Europe, but earnings season will provide a welcome mood change from the past month.

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