Its deadline day for Greece ... Again!

Week commencing Monday 20th February 2012

Overriding Market Themes

Eurozone finance ministers are yet again to meet to discuss the Greek rescue today. We have lost count how many Mondays have been the deadline for a resolutions of the Greek question. However, we hope that today is the day that this story is laid to rest. Athens needs 130 billion euro’s to meet its creditors in mid –March in order to avoid bankruptcy. Eurozone members are forcing ever more stringent fiscal measures on the Greeks, and it will be interesting to see how far they will bend to keep their place in Europe. In essence, will the politicians do what is best for their country or for their political careers?

Back home, petrol heads need brace themselves for a potential lock of the black stuff after Iran halts all exports of oil to both the UK and France amid the growing diplomatic row over Iran’s nuclear program. The Iranian’s sabre rattling is nothing new, but this halt in oil trade could have an effect on domestic oil prices, especially in France which has no domestic oil supplies of its own. In retrospect however, with Libyan oil nearly at 50% pre-Gadhafi levels we don’t expect this to have significant economic impact. Indeed, the significance of this piece of news is the continuing march towards some form of military intervention in the region, which will have a significant effect across the region. 

Across the pond, US home sales will likely have rocketed in January to the highest levels since May 2010, encouraging analysts to believe that the US housing sector has regained its footing. The combined purchases of both newly built homes and existing homes rose to an annual rate of 4.97 million from 4.92 in December, whilst claims for unemployment benefit dropped to the lowest levels since 2008. How can a recovery like this be felt in the US and not in the UK? Well, combine the strengthening jobs market with near record low property and mortgage rates and you have a recipe for real estate growth. The UK however has European issues, an ever increasing number of unemployed and a hugely overweight property market.

In general, we are bullish this week and believe that something, if not everything, should be sorted out with Greece this week. Perhaps more importantly, we would like to see the ECB confirm their bond swap structure reported by the media on Friday. This would have a profound effect on further European debt restructuring, and likely alleviate fears of Portugal, Spain and Italy following Greece into the hands of the bailiffs.

GBP This Week:

Big news for Sterling this week is the Bank of England minutes release on Wednesday. Although no-one expects to see any speculation on a rate hike, it will be interest to see where the committee sees inflation going in the medium term. Also, we are looking for speculation that they will not rule out a further round of quantitative easing. Friday sees the only other release of importance with the GDP figures for the fourth quarter of 2011. Expect to see a -0.2 percent decline in the quarterly figure and a 0.8 percent growth figure for the year.

USD This Week:

Today is President’s Day in the United States, so expect no business from the other side of the Atlantic today. Only release of note is the University of Michigan Confidence figure release for February on Friday. We expect a slight increase in the headline number from 72.5 to 72.8 as sentiment continues to gain momentum in the world’s biggest economy on the back of strong growth figures and a potential resolution to European woes.

EUR This Week:

Obviously, dominating European trading is the Greek and Portuguese positions, however on the data side we are watching German GBP for 2011 on Friday. Expect to see a strong annual figure for 2011 at around 1.5 percent and a contraction of 0.2 percent for the fourth quarter.  

In Other News:

What a shame that British Boxing gets further bad press with the brawl between David Haye and Dereck Chisora making the sporting pages across the world. Both are fantastic fighters and in many ways a real point of pride in any British boxing enthusiast. I suppose it is understandable that, in a sport which essentially entails the battery and annihilation of one’s opponent will cause emotions to get ‘heated’, but there is a time and a place Dereck. I recommend a cup of tea whilst watching the 500th episode of the Simpsons! If that can’t calm their nerves than nothing can!


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