European markets are trading higher and traders have placed their focus on other important issues than post Greek election results. However, the upcoming Greek government’s negotiations with its creditors are still engraved on trader’s dashboard. Greece’s Syriza party has the control of the government and in their final victory speech they confirmed that they are open for negotiation which is a bit of U turn if you compare to their speeches before. Greece need money to keep its government going as the country has to pay the interest to the IMF, bonds are maturing and they need to refinance them. Unfortunately, cash is not in their treasury deposit to fund these expenses and thus leaves them to two other options, which are; either they tap the financial markets themselves with extremely high borrowing cost or find a common ground to access the ECB liquidity door.
It is no brainer that politicians do change their path and tone before and after they are elected and perhaps the same situation may take place with Syriza to secure immediate lending. However, on a bigger scale, what the Syriza party really want to address is austerity. The party certainly wants a haircut for its public debt and this is the avenue on which they are determined to bargain hard. According to Bloomberg estimate, the nation may need nearly up to 48% of debt relief which will enable them to get back on their feet.
The bottom line is regardless of all promises, the Syriza party’s leader will be pushed to make a compromise with its lenders and perhaps some sort of debt relief could be tossed in their favour. Given that there is no immediate urgency of payment until the 28th of February therefore, headlines may start to fade away when it comes to Greece.
Moving away from Greece, the main focus for today will be the UK economic data. The country will publish its assessment for economic performance during the Q4. The overall forecast is for a lower number as the slow down in Europe may have effected the country’s growth. The forecast is for 0.6% which is mainly due to the rust appearing on manufacturing and construction sector.
Finally Russian credit rating was downgraded once again yesterday by the S&P 500 and this has increased the selling pressure on the Rubble. The Russian equity market may suffer as a result of this rating downgrade and makes matter further intense to raise any new capital on the international market.
Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.