Spreadex Market Update
Debt relief Thursday’s focus, as Schauble teases, and then takes away, idea of a haircut
Despite a bearish release from the IMF, which cut its world growth outlook from 3.5% to 3.3% for 2015, the dribble of pro-deal comments from the Eurozone have lent the markets an extra air of optimism this Thursday. A Greek proposal still hasn’t materialised, but after Donald Tusk’s debt sustainability comments the issue has become the focus of the afternoon.
Yet Merkel sent a pretty clear message when visiting Bosnia, emphatically ruling out a ‘classic haircut’ for Greece. Wolfgang Schauble was simultaneously more open to the idea, claiming debt sustainability isn’t ‘feasible’ without a haircut, whilst also stating that under European Union rules that same haircut isn’t possible. What this means is unclear; Schauble may be attempting to soften the idea that he has been completely intransigent throughout this process, whilst also ruling out the one thing that might actually yield some progress and avoid a Grexit.
The IMF’s Blanchard similarly reiterated the need for debt relief whilst stating that the Washington-based institution wasn’t going to be the one to give it due to the arrears Greece finds itself in. The Eurozone is at a weird juncture; seemingly now more accepting of the idea of debt relief, yet just as stubborn on actually implementing the measure. This couldn’t stop the Eurozone markets from showing impressive gains; however, the day’s superficial optimism is somewhat masking the firm, anti-debt relief, and potentially deal-stalling, stance of Germany.
The FTSE remained in the green this Thursday, surging back to Monday’s highest levels as the commodity sector regained some stability. The US indices, meanwhile, opened into a more positive market, helped no doubt by the worst jobless claims figure since the start of March, something that in many eyes will reaffirm the dovish tone struck by the Fed in the latest meeting minutes.
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