Joy cometh in the morning
And what a good morning it may be. We may have an agreement in Greece. The Belgian Prime Minister has just tweeted the singular word “agreement”, with similar noises coming from Greek and Cypriot negotiators. Euro is rallying with stocks set to open in the green.
Until that tweet, yesterday’s meeting between Greece and its creditors in Brussels had yielded little but additional bad blood and ill feeling. Friday’s markets once again closed with optimism while Monday had opened with a grim sense of foreboding.
The main sticking point had seemed to be a German insistence that EUR50bn of Greek state assets be transferred to a private fund. Such is the lack of trust between Greece and its creditors that this is a deposit – or down payment – against a possible breakdown in any future reforms.
Euro higher but we must wait on the details
Nothing is concrete yet, and the devil is in detail. As we have continued to emphasise through the negotiations, there are a fair few parliamentary hurdles that the deal must jump over before it is signed into law. The next shoe to drop may be just how much of the Syriza party will vote with Tsipras for this deal, likewise with Merkel in the Bundestag. Politics is always the risk to economics.
Euro will likely stay bid through the session as headlines start to come through. Stocks are positive and bond yields are falling in the periphery. This should allow funds to once again flow back into Greek banks – how long will it take for the European Central Bank to resume the ELA and allow branches to open may not be that long at all.
Yellen still positive on 2015 rate rise
Away from Greece and the likely focus with a deal done in Brussels, there is the resumption of pricing in a rate rise from the Federal Reserve. Janet Yellen maintained her previous call for an increase in the Fed Funds rate at some point this year. “I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalizing monetary policy,” Yellen said in her first public remarks since the June meeting of the Federal Open Market Committee.
She also noted that oil prices and the strength of the US dollar are drags on US consumption. Oil prices are lower this morning and have continued to fall as we wait on a deal in Vienna on an Iranian nuclear program.
Markets and reaction are very fluid at the moment and we will continue to update things throughout the day on our Twitter (NYSE:TWTR) page www.twitter.com/world_first. As more and more capital is pledged to trades through the next few days we can expect that volatility to increase.
