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Analysis

Hope arising for negotiations end, euro shares go up again

by Dragan Stankovic
written by Dragan Stankovic

choose forex - euro stronger but not for longEuropean shares made a big jump on the markets today after information spread about the Greece –IMF negotiations progress. “A deal could be reached” is the sentence that gave wings to euro shares and also kept a save ground under the U.S stocks. U.S dollar and bond yields also made huge jumps as the Federal Reserve interest hike that was announced got some more certainty.

The new U.S single family home sales made it to highest numbers in seven years, a fact that helped in bolstering the case for lifting benchmark U.S interest rates, of course in combination with other data. “The U.S economy could maybe get the first interest hike already in September, followed by a second increase in December. Our economy should be a lot stronger in the second half of the year” – said the Federal Reserve Governor Jerome Powell.

Negotiations between Greece and the euro zone creditors are still in the world’s focus. Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis brought some new ideas and proposals in Brussels that caught the eye of the creditors. They believe that this new ideas could be a solid ground on which a final deal may be built on, in order for Greece to get some financial help and escape the worse. The new proposals from the Prime Minister may have caused smiles in Brussels, but even more angry faces in his country’s lawmaker society. They are dissatisfied by the offerings made by their government.forex traders - finance minister

Mark Chandler, global head of currency strategy at Brown Brothers Harriman in New York believes that the negotiation topic is affecting the stock markets around the world too much and too long. “If you can look aside the Greek problem and take a glimpse on the monetary policy divergence theme, you could see what is really important in the stock market world these days. After the Fed rate hike, that is on its way, the U.S economy will speed up really hard” – he said.

Steve Sosnick, equity –risk manager at Timber Hill Interactive Brokers Group in Greenwich, Connecticut, has a slightly different opinion. “ Stock markets at the moment believe that the situation will end in peace and no harm will be done, but I believe that everyone should consider the other possible ending”.

The A.U.S dollar index .DXY jumped 1.1 percent, and the euro recovered at the end of the day for 1.38 percent, even though at one point it was on the lowest point in the recent two weeks.

Nasdaq Composite .IXIC dropped 0.04 percent, S&P 500.SPX lost 0.03 percent. The Dow Jones industrial average .DJI on the other hand jumped 0.05 percent.

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Analysis

Tsipras believes Greece will come out even stronger

by Dragan Stankovic
written by Dragan Stankovic

Belgium EU CELAC SummitThe Prime Minister of Greece, Alexis Tsipras gave some optimistic statements about the outcome of the negotiations, but that seems is not enough for the Greek people. Today, in less than twenty four hours, they pulled back more than one billion euros from banks all over the country. Two weeks is all the time Greece has in order to come to an agreement with the euro zone partners and avoid the worst. Financial market experts believe that the authorities will soon be in a position to bring in controls in order to prevent savers from emptying the banks completely.

The European Central Bank is keeping Greece in life by providing emergency funds. A phone call conference was held earlier today in order to figure out how much more money is needed.

What is even more disturbing is the bigger picture. After last weekend, and the failure of the negotiations for the time being, savers in Greece pulled out from the banks over three billion euros. Bank reports from the end of April show that the amount pulled out in the last few days represents 2.2 percent of all of the household and corporate deposits in Greece. These numbers are not official though, so they must be taken with some reserve.<>

The loan payment of 1.6 billion euros that Greece must pay till the end of the month is a heavy burden. If official Athens doesn’t make it, they will become the first country in the euro zone to go broke. Furthermore, it would mean that they will be ruled out of the zone and the single currency.

The list of demands by the IMF and the euro zone creditors a few weeks earlier was instantly rejected by Alexis Tsipras. He believes that to impose tax hikes and spending cuts, particularly to pensions, would be a two blades sword. “This is one the worst, if not the worst economic depressions in modern era. I have no doubt, that these demands, if realized, would only sink us even deeper in the pit.” –he said. An emergency summit of the currency zone leaders is scheduled this Monday, and the Greek Prime Minister is convinced that this is a positive sign that shows that a deal is on its way.“We will come to an agreement and rise above this problem. A solution which is based on the basic principles of the European Union and democracy is out there, and we will find it. Greece will return stronger and all of those who are betting and hoping for a terror scenario, will be sad “– said Alexis Tsipras.

benoit coeureOn the other hand, Brussels officials are not so convinced that a positive outcome is real in any field. ECB executive board member Benoit Coeure expressed his concern to the finance ministers about whether the banks in Greece will work next week. “Tomorrow, I believe they will work. Next week, who knows, anything is possible. Also, no grace period will be given to Greece for the 1.6 billion payments they must make till the end of the month. Look at the situation this way, its eleven o’clock and Athens officials must react and make a deal before it’s too late.

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AnalysisNewsSlider

Dollar strengthens as FED announces raising rates

by Dragan Stankovic
written by Dragan Stankovic

U.S dollar After the U.S Federal Reserve Chair Janet Yellen announced that the central bank plans to raise the interest rates this year, dollar really powered causing the European shares to fall in thin trade.

Current problems in Europe, in particularly the Greeks depth trouble and the poor result that the ruling People’s Party of Spain had in their regional and local elections that, are believed to be main reasons for the fall of the Euro.

This setback in European stocks, was caused by a similar reaction on Wall Street on Friday. Yellen said that the Fed will act if the economy keeps the improving trend, but a recent study showed that it is growing really modestly in the second quarter. If the policy of tightening until inflation and employment is delayed even further, the main risk is an overheated economy, she said.

The benchmark French CAC 40 index shed 0.8 percent. Trading intensity was low, as a result of the fact that the markets in Germany, the United States and the United Kingdom were closed during the holidays.
After the voters in the Spain elections severely punished the PP and their leader Mariano Rajoy, IBEX equity index fell 2.3 percent, and Greece’s ATG share index fell 2 percent
The warning that Greece got about their depth, combined with the results of the Spanish elections, are reallygreece depth weighing on the markets, said the chief analyst at AVA TRADE, Naeem Aslam.
Even though four months of negotiations between the Greece’s Syriza government and the IMF and their euro zone partners have passed, the leftist leaders are still in the same position, struggling to get a releace decision for the 7.2 billion euros in remaining aid which are frozen, and attempt to avert bankruptcy.

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