UK markets
Just like clockwork, the Greek optimism that has dominated this week has been shot down by its creditors leaving everyone thoroughly confused. The back and forth nature of negotiations was always likely bring anything but a last minute solution as both sides try to squeeze every possible concession out of their opposition. This week's bullish sentiment has been driven by a clear possibility that both parties will drag a deal over the line and despite today's rebuttal, a deal still seems likely. Unfortunately, beyond this month’s €1.6 billion repayment due to the IMF, the €7.2 billion currently on the line will not cover both July and August’s ECB payments. Thus unless we see an extension to the current bailout programme, we could see both sides back to the negotiation table this time next month. The decision by the BoE's Martin Weale to announce that rates could rise as early as August was no doubt a concerted effort to warn markets off the idea that there is little chance of a 2015 hike. Despite the early moves off the back of this changed tact, we still see Q1 2016 as the most likely outcome given the tendency of central banks to delay at the drop of a hat.Stagecoach earnings saw a reliance upon its rail operations with Megabus not looking so mega owing to a fall in the price of oil. The lowered fuel prices were expected to provide energy intensive firms with a boost due to the reduced costs of doing business. However, US consumers in particular have used this reduction in costs to hit the road on their own.
US markets
US markets have followed their European counterparts lower today, with the wind taken out of the sails somewhat given the rejection of Greek proposals. Nevertheless, today's US GDP revision provided American markets with an opportunity to focus on something a little closer to home. With US growth falling 0.2% in Q1, you would be forgiven for thinking it was a bad reading. However, with preliminary readings pointing towards a 0.7% drop, it is clear that the weather effects of Q1 eased significantly towards the end of the quarter. The Fed will see this as a positive and will want to focus upon Q2 numbers to ratify the notion that the US economy is well and truly moving in the right direction as portrayed by strong employment numbers and consumer spending. This number keeps a September rate hike well and truly in the picture; a sentiment shared by Fed's Jerome Powell.The Belgian Delhaize Group today announced an all-share merger with Dutch supermarket operator Ahold in a move which will create one of the largest supermarket chains in the US. With an expected market cap of €26.2 billion, there is no doubt that this will only serve to dilute the market and drive efficiencies that allow the firms to better cope in the highly competitive industry that is dominated by low cost producers such as Walmart, Lidl and Aldi. Blackberry shares continued to fall today, following the short-lived positivity gleaned from yesterday's weak earnings numbers. The idea was that the deterioration of the firm is slowing, yet ultimately I see a firm with little direction, falling market share and an inconsistent strategy for the future. It seems the markets agree with me.
Commodities
Crude oil inventories fell another 4.9 million barrels last week, representing both the eighth consecutive weekly fall in stockpiles, but also the third week where inventories have fallen more than expected. This deterioration in supply has had a profound impact upon price, with both US light and Brent crude both seeing a more bullish trading environment over recent weeks. However, with US suppliers likely to raise output should price rise much further, it is likely that any upside will be limited for some time yet.FX
The dollar appears to be back with a bang, as EUR/USD and GBP/USD are a shining example of the weakness seen across currency markets against the greenback over the past two days. While I do expect to see further gains for the dollar, it is also worth bearing in mind that as things stand it looks a lot more like a short-term correction of recent dollar losses rather than a continuation of the USD bull market which characterised the first quarter of this year.
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