Blue chips likely to dip over Greek debt

A cautious mood is set to prevail in the markets this morning, with anxiety over the on-going Greece debt crisis and crucial upcoming economic data likely to dominate traders’ mindsets.

In out-of-hours trading, GFT is forecasting the UK index to open down 16 points from last week’s close, at around 5,932. The German DAX is quoted to open down 22 points at 7,244 and the French CAC is called down 15 points at 3,975.

The gravity of the problems facing Greece were underlined at the weekend by comments from Jean-Claude Juncker, prime minister of Luxembourg and head of the Euro Group of Finance Ministers, saying that a large-scale privatisation of state assets should be considered.

A major concern for stock markets with the mounting prospect of Greece being forced to restructure its debt, is the fear of contagion, and with credit rating agency Standard and Poors issuing a downgrade of its forecast for Italy, the Eurozone’s third-largest economy, to negative, we can expect more of the same this week.

Debt concerns are also in play in the US, with government debt there hitting its legal limit on borrowing. Stocks in the Dow racked up a third straight week of losses.

Investors are also likely to be hesitant ahead of an array of key economic data due out this week, including GDP figues – the main measure of economic activity and growth – from the UK and US, as well as the German IFO index, a leading indicator of business expectations and economic conditions, which is expected to trend lower.

The US first quarter GDP number will be the second estimate released, and an upwards revision of from 1.8 per cent to 2.1 per cent is forecast.

Martin Slaney is director of global dealing operations for GFT.