A strong rebound in European equities amid hopes of a Greek deal

Friday, July 10, 2015

The Hang Seng index continued its strong rebound overnight after gaining nearly 2% towards 24,870. The Shanghai Composite index extended gains for second consecutive session after rallying over 4.5% towards 3,900. In Japan, the Nikkei missed the uptrend and slid slightly lower by 0.40%. There is increasing volatility and nervous trading conditions across the Chinese equity markets this week. Investors remain cautious over a slowdown of Chinese economic growth, while China’s central bank tries to boost economy with increasing liquidity measures.

In the US, the Dow Jones edged higher by 0.20% hovering around 17,550, while the S&P 500 and NASDAQ indices extended gains over 0.25%. The USD index reversed and slid lower this morning to retest the 96.0 area against a basket of currencies. European equity markets posted strong gains in early trade this morning amid hopes for a positive outcome at the upcoming Eurogroup meeting over the weekend. The DAX, CAC, IBEX and Italian equity benchmark indices rallied over 2% this morning. The euro surged higher and breached 1.11 against the USD, showing signs of upside recovery.

EURUSD rebounds above 1.11

EURUSD Curncy (EUR-USD X-RATE)   2015-07-10 09-03-00 

After the US markets’ close, the Greek government submitted its reform proposals to Brussels ahead of European creditors’ deadline. The reform plan has already been approved by the Greek cabinet and it will be handed on to the Eurogroup during a meeting on Saturday for final negotiations on a new three-year bailout worth $53.5 billion euro. European Council President, Donald Tusk, reported that “the realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors”.

IMF downgraded its global growth outlook for 2015 from 3.5% to 3.3% yesterday, citing a disappointing quarter particularly in the US as well as ongoing concerns that the Greek crisis could slow down the global economic recovery. Today, Fed’s Chair Janet Yellen will discuss US economic outlook at the City Club of Cleveland.   

Today, the main focus will turn to the release of the US wholesale inventories data as well as construction output and trade balance figures in the UK. Sterling rallied strongly towards 1.5450 against the USD, showing strong upside momentum. However, GBPEUR remained under pressure and extended declines towards 1.3850.

GBPUSD rallies above 1.54 

GBPUSD Curncy (GBP-USD X-RATE)   2015-07-10 09-03-32

Events for today:

0930

UK

May

Trade Balance & Non EU

0930

UK

May

Construction Output

1000

US

May

Wholesale Inventories

 

All times UK Local Time

 

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