Greece expected to ask for bailout extension

Wednesday, February 18, 2015

Global equity markets traded cautiously higher both yesterday and overnight as investor’s attention remained firmly on the Greek bailout talks. The majority of benchmark indices across Europe, the US and Asia posted tentative gains as speculation that Greece would ask for an extension to its existing bailout package today reduced some of the uncertainty that has dominated sentiment in recent weeks. Tense talks held earlier this week and last week proved unsuccessful as Eurozone member creditors and officials from Athens failed to reach a revised agreement and with Greece having until the end of this week to extend the timeline on its €172bn bailout we could see the as of yet defiant anti-austerity government forced to negotiate less favourable terms in order to shore up its public finances.

Japanese benchmark indices extended gains overnight with the Nikkei 225 adding 1.18% while the TOPIX gained 1.41% after the Bank of Japan opted to maintain monetary stimulus. The widely expected move by policymakers comes after better than expected GDP data released over the weekend which showed the country had finally emerged from recession with Q4 preliminary GDP growth rising to 0.6% q/q from -0.5% q/q the previous quarter. The central bank will maintain its annual rise in monetary base at 80tn yen (around $670bn) which helped support stocks to a seven year high and saw the yen trade towards 118.88 before pushing back above 119.00 against the dollar as we neared the European open. Despite the improving outlook, the country still faces considerable headwinds with lower oil prices threatening the central banks efforts to maintain a 2% CPI target as deflationary pressures continue to mount.    

Spot gold prices resumed their downward trajectory yesterday after a brief correction that saw prices rally for three straight sessions towards $1,230/oz. The precious metal ended the session 1.7% lower as tentative support at both the 50 day MA and 100 day MA gave way to losses towards $1,203/oz before a partial recovery to close at $1,209.89/oz. Steady progress between Greece and its creditors as well as cooling tensions between Russia and Ukraine have encouraged market participants in search of higher yields back into risk assets with activity this morning seeing the yellow metal open up around yesterday’s close as it continues to trade under pressure.   

JPY trades back above 119.00 after BOJ maintains monetary base

JPY Curncy Japanese Yen Spot 2015 02 18 07 58 48

Gold prices plummet as investors shift back into equities

XAU Curncy Gold Spot Oz 2015 02 18 08 01 36

Events for today

CN Market Holiday 

0930

UK

Jan

Claimant Count

0930

UK

Feb

BOE minutes

1000

EZ

Dec

Construction Output

1330

US

Jan

Housing starts & Building Permits

1330

US

Jan

PPI final Demand

1415

US

Jan

Industrial Production

1900

US

Jan

FOMC Meeting Minutes

Topics: Gold, Europe, ECB, JPY, BoJ
More from: Kash Kamal