Markets strong, if muted, as busy Eurozone week lies ahead

After all the excitement of this morning, the markets quietened down this afternoon and began to eyeball the events left to come this week.

Currently the ‘Greek deal’ is nothing but a dream. That could change, at least partially, when (or if) legislation is passed by the Greek parliament by Wednesday, paving the way for a vote in the Bundestag on Friday, alongside votes in all of the other member states. Get beyond those steps and then negotiations on the contents of a third bailout can begin. In terms of the other pressing issues, the Eurogroup still hasn’t announced its plans for a Greek finance bridge to see the country through its looming ECB repayments, whilst the central bank itself interestingly decided to keep its Greek bank ELA at €89 billion, meaning capital controls remain in effect.

The difficulty and strain that lies ahead not only for Greece and the Eurozone as a whole but the core concepts that hold the currency bloc together may be responsible for the fairly muted response by the European markets. Now, 3 digit gains for the DAX alongside strong performances from the CAC and the FTSE isn’t exactly a bad day; but given the movements the markets have seen on the sniff of good news in the past month, the reaction to this ‘deal’ is telling.

Talking of deals, progress on an Iran nuclear agreement is reportedly inching closer to a positive conclusion, something that doesn’t bode well for the beleaguered Brent Crude. A deal would see the lifting of Iranian sanctions and with it an influx of fresh oil into an already saturated market. The commodity has reacted as one would expect, slipping to around 1% in losses as the day went on.

The ‘resolution’ to the Greek saga also frees up some extra attention for the much-scrutinised US rate hike debate. Last Friday Federal Reserve chair Janet Yellen struck a fairly hawkish tone, stating that rates would rise in 2015 in a speech in Cleveland. Yellen also noted the issues, both domestic and global, that could stall any rise; one of those was Greece, with the others being poor US productivity, limp wage growth and a difficult jobs sector. There is also the case of the strong dollar, something that will be in focus once again as earnings season gets underway. Yet for now the Dow Jones basked in the glow of a Greek deal, ignoring the growing strength of the dollar against the euro.