Afternoon Trading Update
Spread Betting 22 June 2015
Heading into the close the FTSE 100 is powering ahead as the ECB have kicked the Greek can down the road.
The market has rallied as no news from Greece is deemed to be good news.
Traders were waiting on the edge of their seats for lunchtime's ECB announcement, only to be told it would be the end of the week before we know the outcome; however, this was good enough for dealers.
It has gotten to the point where can kicking by Greece's creditors is seen as a positive outcome for stock markets, and as long as traders are not told that Greece must go back to the drawing board, it is a sign to jump on the band wagon.
The ECB has spent the previous five years scolding Greece, but ultimately allowing the nation off the hook in the end, and this is precisely what traders predict will happen again.
Heading into the close the FTSE 100 is 20 points higher, as the rally continues for a second day.
Stock markets in Europe continue to be of the opinion that a Greek deal is on its way later in the week.
Yesterday's developments have been taken as a signal that investors can stop worrying about Greece for now, as some sort of solution is on its way.
If we reach the end of the week without a deal, the response could be ugly.
Already Greek lawmakers are indicating their displeasure, and there is still much work to be done before we can safely say that the issue is resolved, but for now the default assumption remains that a successful end is on its way.
The UK market is lagging behind its counterparts, but having continued to build on yesterday's gains it looks in a position to challenge the 7,000 level once again.
Weir Group shares are on the up today after a difficult few sessions, helped along by a read-across from Petrofac's results, as investors begin to hope that the months to come will prove to be a more fruitful environment for firms connected with the oil market.
Bunzl failed to join in the wider Petrofac-based rally. There are concerns that the recent acquisition spree will take a while to digest, with a consequent impact on margins over the coming few months.
In the US the Dow Jones is up 130 points, at 18,145, as bullish sentiment from Greece has been felt across the pond.
The US market has the advantage of not being too closely linked to the eurozone, but on a day like today it is not reaping the rewards from the positive swing.
The US market is still buoyant from the mildly dovish remarks from the Fed last week and traders have found the right balance of being bullish but not afraid of the rate rise the Fed may introduce at the back end of the year.
Corporate reporting is few and far between, and the final reading of the first-quarter GDP on Wednesday is the highlight of the economic announcements.
The overall employment data from the US is impressive, but it will be difficult to see an interest rate rise this year if growth in the first three months is negative.
US indices failed to replicate the strong showing of their European peers this afternoon, with gains stymied by the return of monetary policy commentary from Fed members.
Jerome Powell, a voting member of the committee, has aired his views on the rate outlook, with the opinion that a September rate hike is now a 50% chance, with a steady rise in rates in coming years.
This is hardly a radical departure from the established view, but such a clear view from a voting member was enough to put new fight into the US dollar, leaving equities unable to sustain yesterday's gains.
2015 so far has seen US indices fare poorly on the day after a rally of at least 0.5%, and today has been no different.
Dip buyers are still active, but faced with a rising dollar they can make only the slightest headway.
The US dollar is back in demand as Greece's fate still hangs in the balance.
The Greek proposal has been received by its creditors who are currently assessing them but won't have an answer until the end of the week.
The euro is trading lower today, but it is remarkably strong considering one of its members is close to the exit.
Another way of looking at it is that dealers are dead certain that the ECB will not allow the nation to leave and a deal will eventually be reached.
The US dollar has been drifting lower since March, but as we approach the second half of the year it could be given a second wind as a rate rise from the Fed this year has is a distinct possibility.
It was a day of dollar dominance, with the currency carrying all before it thanks to Mr Powell.
Although we saw some of the moves reversed in the afternoon, with the dollar index easing off the session highs, it looks like dollar bulls are planning to make hay once again.
The euro continues to suffer from expectations that a Greek deal is incoming later in the week, repeating the pattern of recent days.
Repeated extensions of the ECB's liquidity cap reinforces the impression that eurozone institutions will do what is needed to provide politicians with the time to hammer out a deal, despite previous assertions that time was fast running out.
Commodities Market Update
Gold is losing its appeal and the strength of the equity market is exacerbating the problem.
Traders no longer have the fear factor when it comes to the eurozone, and the possibility that Greece will have a deal at the end of the week has triggered a sell-off in gold.
The second reason behind gold's decline is the Federal Reserve may be raising interest rates this year.
The US central bank may not be in a rush to ramp up interest rates but it is making small steps towards it, and all the while gold is feeling the pain.
Copper is a touch lower on the trading session ahead of HSBC's survey of Chinese manufacturing overnight, and the consensus is for the sector to remain in contraction.
Copper has been locked in a downward trend ever since China started to go off the boil, and it will be difficult for the red metal to snap out of its losing streak. Unsurprisingly, the combination of Greece optimism and Jerome Powell's comments meant that gold and silver went into full reverse, making a second day of heavy losses for precious metals that has transformed the outlook from bullish to firmly bearish.
A steady rise in US rates is anathema to the gold market, which now threatens to break to new lows for the year.
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'Afternoon Trading Update' edited by AG, updated 22-Jun-15
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