European markets are trading lower to continue their trend towards the downside- a correction territory some may say. Traders are wondering if the squeaky wheel will get the grease! We all know which is the squeaky wheel- of course, it is Greece. Another proposal was submitted by the Greek officials yesterday, but within an hour, we had reports that such a proposal is once again not addressing the concerns, which the creditors have.
Any ship can weather through only so many storms no matter how determined its captain and crew might be to keep the vessel afloat and this is the major concern among traders. You can never rule out a full blown out crisis scenario under which Greece leaves the Eurozone and the contagion effect takes place. But, for the time being the policy makers are determined to put on show that apparently does show that they are trying their every effort to resolve the issue in hand but, in reality, if they do want to address the matter then it will be only a matter of a few meetings and all thorny elements can be taken care off.
The never ending Greek saga is taking its toll on the equity and the bond market. Given that the German DAX is already in its correction territory, it is highly likely that we may see another 10% sell off from its current levels if the bond yields keep on moving up along with the strength in the euro. Given that the inflation and economic data are also beating the drums of the QE success, the amplifier of the ECB QE may end soon than originally planned has also increased its volume.
Back in the UK, today’s focus will be towards the speech, which the chancellor, Mr Osborne will deliver in the mansion house. It is important that he water down his approach towards the banking sector provided that one of the giant bank has made a massive job cut announcement and in a process of winding down their operation in the UK . However, if he still comes up with a strong arm approach it will ranch up the operating cost for other banks and a possibility of a further job cuts by other banks in order to exile the UK market can never be undermined.
Equally important is the economic data for the UK , which is set to be released today. The April manufacturing and industrial production data could show the stamps of the fragile PMI data, which was released earlier this month. The forecast for both numbers is for 0.1% which is a lot less than the previous reading.
Traders are still smelling more blood when it comes to the UK grocery market and with Sainsbury sales number released this morning has further disappointed investors. The like for like sales came well below the street estimates confirming that the price war is still intensifying and the only leaders in this space are German grocery stores. The report for Sainsbury can drag the sector even lower in today’s session and the short interest remain at it elicit level.
Flyby failed to paint rosy picture again after the chief executive confirmed in his statement that the company is still facing more challenging environment. The company paid heavy price when it announced a profit warning at the start of this year and has made a loss of 3.65million pound so far this year. This is eye watering number especially, when you compare the performance with previous year when it made profit of 8.1 million pound. However, the company is still in process of structuring and shedding jobs in order to bring its cost down which are correct measures. Provided that fall in the oil price has increased the spending power of consumers, this can bump up its passenger load.
Disclosure & 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.
by Naeem Aslam