NEWS from Luxembourg yesterday evening that Eurozone finance ministers may release a fifth tranche of bailout funding for Greece will be the major focus for traders this morning, but European stock markets are nevertheless expected to open to the downside this morning. The general reaction is likely to be that this is merely another finger-in-the dyke response which will not prevent a seemingly inevitable default.
GFT quotes two-way prices on stock indices around the clock, even when the underlying markets are closed, and the initial direction is down for the open this morning. The FTSE 100 index is called to open down 15 points at 5,700, thereby giving up virtually all of the previous week’s modest gains. The German DAX is forecast to open down 14 points at 7,150, and the French CAC 40 is quoted to open down 10 points at 3,813.
The mounting concern now seems to be that releasing additional funding for Greece is just throwing good money after bad. Potentially of greater importance for markets this week will be the looming no-confidence vote in the Greek government itself, and its austerity plans. The result of the vote is expected tomorrow evening, and following the Prime Minister’s cabinet reshuffle, consensus would suggest that confidence is secured. There is however still a significant risk that it will fail, as events are moving rapidly, and in that instance we will be facing havoc in the markets. Some are touting this as the biggest week in Greece’s history; ultimately it may prove to be so for the Eurozone too.
Across the pond, we have the latest decision from the Federal Reserve’s FOMC meeting, but although we will enjoy the novelty of chairman Ben Bernanke’s new-style press conference following the announcement on Wednesday, few fireworks are expected by way of signal in the timing and likelihood of a future policy shift. Friday, though, could herald a choppy end to the week, with important US data by way of the durable goods reports and final reading of first quarter GDP.
Martin Slaney is director of GFT’s global dealing operations