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Greece-EU: Ball Bounces From One Camp To The Other

Published 06/25/2015, 06:46 AM
Updated 04/25/2018, 04:10 AM

The ball bounces from one camp to the other as Greek talks stumble. Creditors refuse Greek proposals and Greek officials decline creditors’ counter offers. Not a significant step has been taken yet. As the IMF keeps the rope tight around Greece’s neck, Germany refrains from accepting any plan that would go against the IMF’s approval. The market is confused, not knowing how to react; the volatilities remain two-sided.

Traders remain sellers on tops in euro against pound and the US dollar. Should EUR/USD’s negative momentum gain traction, a further sell-off could take the pair down to a distant 1.1040/60 (Fib 23.6% projection from Apr-May projection on June rise / technical monitor). Option offers trail below 1.1150 at today’s expiry, above this level vanilla bids dominate. The volatility is seen two-sided on Greek issues. Against the pound, 0.7070/0.70p is where the next battle between bears and bulls should take place.

The past two session’s sell-off in DAX has not damage significant technical levels. The key support remains 10800 mark, while the intraday sentiment, somewhat positive on Greek hopes should keep the downside limited at 11180 (200H MA) in dearth of valuable news out of Greece.

Japanese inflation on the wire

Nikkei lost 0.46% in Tokyo while USD/JPY remained well bid above Ichimoku’s conversion line (123.46). The May inflation report, due tomorrow, should revive the BoJ doves should the data meets the soft market estimates. The inflation ex-fresh food, closely monitored by the BoJ, is expected to fall from 0.3% to 0.0% y/y. Even if the BoJ seems confident on progress toward the 2% mid-term inflation target, it would be difficult to convince if hard data keeps on deteriorating. This being said, soft inflation could only mean longer and cheaper yen on the market, which, combined to capital outflows out of the Eurozone to avoid Greek exposure before next week’s June 30th deadline, should attract investors back to Nikkei stocks.

Brenda Kelly, LCG’s HeadAnalysts, provides updates on the main equity movers:

FTSE: Murmurings of rate hikes, a Greek stalemate and some ex-div stocks are keeping the FTSE low this morning. The downside compared to the likes of the DAX and the CAC has been limited but we continue to trade sideways. One can expect to see a headline driven market, here and elsewhere until the Greek deal is finalised. Investors remain somewhat on the side-lines this morning as the Greek merry-go-round rumbles on. Compass, Experian and United Utilities are lower as the shares trade without entitlement to their latest dividend on Thursday.

Debenhams Plc (LONDON:DEB) (+0.94%) A trading statement from Debenhams has been received well by investors this morning. Sales were fairly flat in the third quarter owing to an overhaul in its promotion strategy and a cautious consumer. An improved website and cheaper delivery charges saw a 16.7% increase in online sales. Shares in the company are up 23% year to date and hit an all-time high in late May. The promising outlook for the full year may see shares push back to the highs in the near term.

Tesco (LONDON:TSCO) (+1.32%) Price wars, loss of market share and a substantial annual loss reported in April have been to the detriment of investor sentiment towards Tesco. Fortunes may be changing however. News that at least 7 firms are to bid for Tesco’s South Korean unit Homeplus has sent the supermarket to the top of the index this morning. The deal, said to be worth around $5bn should help temper the large debt holdings of the firm. Shares have bounced back over 40% since hitting an all-time low in December but still trade at half the value seen back late 2007.

J Sainsbury (OTC:JSAIY) PLC (LONDON:SBRY) (+1.16%) A broker upgrade from Investec and chatter of a potential tie-up between Morrisons and Sainsbury is also keeping supermarkets bid this morning. It would clearly be subject to agreement from the competition authority but the notion that costs would be curt and earnings would be boosted (according to SocGen) calculations

Sage Group (LONDON:SGE) (+0.97%) Fresh from a 6% decline in its share price yesterday Sage has benefited from a broker upgrade this morning despite the fact it expects to see slowing growth in the latter half of the year. The company expects annual sales growth of circa 6% and for the full year.

Royal Dutch Shell (LONDON:RDSa) PLC (LONDON:0LN9) (0.23%) is looking to invest in Tehran’s energy industry should sanctions be lifted. BP Plc (LONDON:BP) (0.38%) is also amongst the gainers. Recent falls in the oil price have spurred M&A rumours despite the fact that fewer of the smaller companies are as financially distressed as they were a few months ago.

ARM Holdings (LONDON:ARM) (+0.98%) The chip designer is also demand as Apple Inc (NASDAQ:AAPL) surges higher on Carl Icahn’s bullish rhetoric. Off the highs seen in April, the share price is up 15% year to date and may well present a challenge on the 1300p marker if the Apple trajectory continues.

We are calling the DOW higher by 116 points to 18,082.

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