Market Comments

Heading into the close the FTSE 100 is sinking further and further into the red as Greece drags the market lower.

UK markets

The FTSE 100 has failed to hold onto the 7000 mark as Greece’s fate hangs in the balance. Traders can’t hold their nerve as the Friday deadline draws nearer. This isn’t the first time that Greece has brushed with bankruptcy, and it won’t be the last, but traders are getting out of the market while the exchange is open. If the past is anything to go on, then an agreement over financing will be announced at the last minute, and investors will come flooding back in, but while neither side is willing to buckle, dealers will stay on the sidelines. The so-so manufacturing numbers from China overnight triggered a sell-off in the commodity-related companies. Beijing has spent a lot of time and money on trying to stimulate the economy, but the economic indicators are not showing it yet, and without that signal dealers will stay short on the miners.

US markets

The Dow Jones is hovering around the 18,000 mark, and the US seems indecisive as there is no overriding theme, but many small factors could pull it in either direction. Dealers will not be coaxed into buying US equities while Greece still needs a handout before Friday’s repayment, and this will erode any rallies. The poor personal spending number underlines the problems in the US economy; income is ticking higher but members of the public are saving, not spending. Shares in Alters are up 6% after the company was approached by Intel. The move has been in the pipeline for several months as this isn’t the first attempt made by Intel. The semiconductor sector has seen mergers and acquisitions activity over the past year, and the low interest rate environment accommodates such corporate expansion.

Commodities

Gold has popped above the $1200 mark after Eric Rosengren of the Federal Reserve stated the conditions were not right for an interest rate rise. Mr Rosengren is a non-voting member of the Fed, but he said what a lot of traders are thinking. It would be difficult to imagine an interest rate hike when the US economy contracted in the first quarter. Copper has little to be cheery about after the HSBC manufacturing PMI for China showed that the sector remained in contraction in May. The trading range for the red metal was tight as the survey wasn’t weak enough to warrant additional stimulus from Beijing, and neither was it so encouraging to see a pick in demand for copper.

FX

The euro is still feeling the pain as Greece is still without a deal. If Athens doesn‘t get its next tranche of the bailout, the nation will be bankrupted by the repayment which is due on Friday. Traders are quietly confident that Greece will broker a deal at the last minute, but in the meantime dealers don’t want to be long on the single currency while there is a compromise in sight. The US dollar has resumed its dominance in the currency markets after solid manufacturing and construction figures from the US. The market has a short memory, and Friday’s disappointing GDP data hasn’t deterred the dollar’s push higher.