Eyes To The Fed as Markets get Respite from Greece
Stock markets saw a marginal recovery yesterday as the powers that be had no further comment on Greece during trading hours and the war of attrition carried on. Stock markets didn't make back what they'd lost over the previous session by any stretch and the FTSE barely moved despite above average volumes being traded. The Telegraph ran an article this morning that quotes Standard Bank saying British savers stand to lose 10% of the value of share portfolios if Greece does get booted out of Europe.
After the close of play, US Treasury Secretary Jack Lew got on the phone to Alex Tsipras to put some American muscle behind getting to a resolution. Greece showed no sign of a softening rhetoric though, as Alex Tsipras accused the IMF of "criminal responsibility" for the mess that Greece finds itself in. He believes that all of Europe should see the IMF's insistence on tough budget cuts as unjust and believes that it may be "part of a political plan, to humiliate an entire people that has suffered in the past five years through no fault of its own". We'll wait and see if anything productive comes from tomorrow'sEuropean finance ministers meeting, or whether the word 'Grexit' continues to get a more public airing from those in power.
From France, right wing leader Marine Le Pen has managed to get enough support to form the 'Europe of Nations and Freedom Group' in the European parliament. The group is basically made up of 36 far right politicians from across Europe and will now have greater influence within parliament, as well as access to more funding which could allow them to further increase their head count. Ms Le Pen is keeping busy in Europe ahead of presidential elections in France in 2017 which, as it stands, she has a shot at winning.
In the UK City AM reported that David Cameron only won a vote on rules surrounding the EU referendum because Labour voters abstained. The paper is calling into questions the PM's grip on his party after he backtracked on statements that ministers that do not toe the party line over the referendum would be sacked.
Another interesting story in the press during the London Session come from Bloomberg, entitled "The China Bubble is Going to Burst" and says the debate is now 'when and not if'. The article quotes Bocom International who have analyzed global asset bubbles of the last 800 years (how, we don't know) and said that based on this analysis, China could go to the wall within six months. Again, we question how they did eight centuries of analysis, but do concur that it is only a matter of time for Chinese stock markets.
China wants to play a bigger role in global finances, with hopes that their currency will become a global reserve currency. Today the WSJ reports that the Bank of China will become the first Chinese bank to help set the global gold price. They have been accepted into the twice daily London Bullion Market Association auctions which set the global benchmark. The move is largely welcomed as it will increase liquidity and pricing transparency in the market.
Today most of the market focus will be on what the Fed have to say about economic conditions and whether those words allude to a rate hike in the near future, or not. Markets have been told by the Fed to think for themselves about when a rate hike is likely, but with political pressures on the Fed to hold off on rate hikes there is more than just economics to consider. As such today's FOMC announcement will be this week's biggest news (unless Greece get kicked out before Friday).