Market Comments

Claims of a Greek deal are promptly denied to leave investors in the dark.

UK markets

European markets have turned a boring day into one to remember, as news of a potential deal over Greek debt has hit the wires. The announcement that the conditions for such a deal are being drawn up by creditors raised hopes that we will soon see the final €7.2 billion tranche released, paving the way for government pensions and salaries, along with the €1.5 billion of IMF payments due in June looking likely to be paid on time. As with almost every stage of this process, a bullish statement from the Greeks has since been denied by the creditors, which on this occasion has fallen to the European Commission vice president Valdis Dombrovskis who has moved to disregard those initial claims. As ever, this leaves everyone no clearer to the actual status of current negotiations and leaves a default as a clear possibility. In any case, it is worth being sceptical when considering such a deal if and when it finally comes, for any ability to meet near-term obligations does little to dent the €330 billion total debt, which is growing every day.

On a day of substantial gains across the board for the FTSE 100, the rise of Imperial Tobacco has been notable, given the shift towards its purchase of four US cigarette brands, following approval by the regulators. While the move would make Imperial the third biggest cigarette supplier in the US, there is a feeling that the traditional cigarette is going to be a dying product given the restrictions placed on users, coupled with an increasingly health conscious consumer base and ever-rising duties. Thus its move into the e-cigarette market could be just as important as today's announcement. The proposed takeover of Aer Lingus by British Airways is facing a final hurdle as it seeks approval from major shareholder Ryanair. The decision to invest in its Irish rival surely was borne out of a need to ensure Ryanair remains the top dog Irish carrier. However it remains to be seen whether it is willing to see a possible rise in competition in exchange for a short-term buck.

US markets

A strong start for the US indices today comes off the back of significant selling this week which has put to bed the jublation seen upon punching to new all-time highs in the Dow last week. Much like the FTSE 100, those losses earlier in the week are likely to be seen as a buying opportunity for the bulls and I expect to see us push higher for the remainder of the week. With very little fundamental news driving prices, the markets are seeking direction from long founded issues such as monetary policies and Greek negotiations. Despite the denial that a deal is being drawn up, there is a feeling that the Greeks are moving closer to that all-important deal.

McDonald's has decided to scrap the monthly same store sales reports which have portrayed a brand which is clearly floundering in the face of increased competition from the likes of Chipotle, Five Guys and Shake Shack who are perceived to provide a better quality product. While this move will no doubt ring alarm bells to investors, the move is a shift towards the industry norm and given the seasonal fluctuations that can occur in any business, the ability to aim for quarterly rather than monthly targets allows CEO Steve Easterbrook the ability to turn the brand around without the same degree of constant scrutiny.

Commodities

Brent and US light crude are falling as a combination of a resurgent US dollar and an overstocked oil market begin to kick back in to reverse the gains seen since mid-March. The all-time record highs in US oil have been largely forgotten for many due to the weekly update highlighting the weekly reductions in supply that have been persisting throughout May. However, with huge US crude stockpiles still awaiting sale, along with a likely rise in Iraqi and Iranian oil, the trend appears to be negative once more.

FX

EUR/USD and GBP/USD are continuing lower today, following the resurgence of the strong dollar trade in the past week. While the weakness of the US dollar has driven currency markets from mid-March to mid-May, it is likely that we are now going to see a resurgent dollar similarly drive the market going forward and thus the story of whether we will see parity reached in EUR/USD will be back on the cards in the coming weeks.