Tuesday afternoon jumps into life with Fed and Eurogroup news

The news that consumer confidence missed targets but was upgraded for last month was swept aside by Janet Yellen’s testimony.

In her pre-testimony statement, Yellen was more hawklet than hawk, affirming the Fed’s plea for patience, but clarifying that ‘patience’ may only mean the next couple of meetings in attempt to restore an air of flexibility to the Federal Reserve.

The Fed chair was largely positive over US labour conditions, stating that whilst they still need to improve, something the Fed fully expects to happen, that so far growth has been encouraging. After claiming that the oil prices will be a big plus, Yellen reiterated the fact that the Fed won’t act until they have confidence that US inflation is on its way to the targeted 2%. These comments still leave a potential June raise, the data most regularly discussed, on the table, with Yellen stating that any rate rise will be preceded by a change in forward guidance by the Fed. Whilst not as hawkish as some would have liked, investors reacted positively to Yellen’s statement, with it looking like the Dow is on track to resume it record-breaking push.

Unsurprisingly Yellen highlighted China’s economic slowdown and the ongoing situation in Europe as potential global destabilisers. And Yellen was probably right to highlight the latter given the continued turmoil the region has undergone this afternoon. After the EU Commission described the Greek reforms as ‘sufficiently comprehensive’, the Eurogroup approved Greece’s proposal. However any sigh of relief was quickly reversed by a swift and ominous letter by IMF leader Christine Lagarde, who warned that the current reforms would not be enough for the IMF to successfully review its Greek programme.

Similarly, whilst approving the bailout the ECB’s Draghi provided the caveat that the central bank remained unconvinced by the lack of detail in Greece’s reforms proposal. Greece is now fighting a war on two fronts, trying to appease its creditors and its electorate alike, with many back at home dissatisfied at the perceived capitulation of Syriza’s revolutionary aims. Nevertheless, the markets were pleased by the progress made today, even if the core issues still remain unsolved.

After the OECD’s Angel Gurria was bullish on the state of the UK economy, says its recovery is going well but needs to fix productivity issues in order to see living standards start to rise, the FTSE basked in the glow of the US and European markets, riding their bullish wave to post its own gains despite a lack of news back at home. Combine this with Brent Crude’s now regular rebound to $60 per barrel alongside even more impressive gains for copper, and the correlated growth in both the oil and mining stocks, and the FTSE returned to the kind of rally it saw at the end of last week.