Spreadex Market Update
Markets flat as further cracks appear in Eurozone; Yellen to testify this afternoon
A trickle of news struggled to persuade investors to take on any risk this morning, leaving the DAX and the CAC fairly flat in the process. With the Greek vote this evening, Tsipras is having to work to keep the numbers of rebellious MPs below the key 40 figure to ensure that the deal is passed through parliament. Germany, meanwhile, is the middle of its own minor political mess, with Merkel’s coalition partners the SPD urging the chancellor to put her finance minister on a leash after Wolfgang Schauble seemingly attempted to drum up support for the temporary Grexit he floated at the weekend. The fractures starting to appear in the Bundestag, emblematic of the schism appearing across Europe, leaves Merkel will as difficult a task on Friday as Tsipras faces today.
In terms of the funding bridge, the European Commission is reportedly pushing forward with a €7 billion loan funded by the EFSM, despite the non-euro opposition that arose during yesterday’s ECOFIN summit. The region is running out of time to find the funds, and with EU lawyers deciding that a pledge to Cameron that the EFSM wouldn’t be used for such situations can be broken the European Union could be looking at a few more cracks appearing on its already crumbling façade.
The FTSE failed to escape the flatness that was omnipresent this morning, with the UK’s jobs data coming in more mixed than was expected. Wage growth was only fractionally lower than the 5 year high of 3.3% that was forecast, arriving at a still healthy 3.2%; jobless claims, however, increased instead of falling, and the unemployment rate lifted away from its 7 year low to 5.6%.
Whilst the Greek saga plays out in the background, the US markets have a busy afternoon ahead of them, with PPI, industrial production and Empire State manufacturing figures providing an amuse bouche for the main course that is Janet Yellen testifying in front of the House Financial Services Committee. Investors will be looking for firmer signs on whether an interest rate lift-off will occur in September, as well as details on the size of the USA’s second quarter recovery following its weak opening to 2015.
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