Greek €3 billion bailout payment get eurozone finance ministers stamp of approval

Today’s US opening call provides an update on:

• Greek €3 billion bailout payment get eurozone finance ministers stamp of approval;

• Chinese inflation jumps to 2.7% in June;

• Mixed data out of the UK ahead of Q2 GDP estimate.

European indices are trading around 1% higher on Tuesday, after eurozone finance ministers agreed to release the next tranche of Greece’s bailout.

The discussions between Greece and its creditors have been far smoother in the lead up to today’s agreement than we have become accustomed to, which may be why investors have responded so well to it. Usually there’s plenty of back and forth between both sides, before Greece eventually backs down and implements an additional round of painful and unpopular cuts in order to avoid bankruptcy.

That isn’t to say that there won’t be trouble down the line, as Greece continues to cut public sector jobs and carry out the agreed reforms, because there probably will. However, it is encouraging to see the process move along much more smoothly than it has in the past. Greece still looks on course to return to growth next year, for the first time since it requested a bailout, although there are concerns that the process of drip feeding the bailout to Greece may delay this.

China’s CPI figure, released over night, had little impact on the markets this morning. Inflation rose to 2.7% in June, a big jump from 2.1% the month before, but still well below the target rate of 3.5%. This is unlikely to convince the People’s Bank of China to tighten monetary policy any time soon, especially given the sharp rise in interbank lending rates in recent months that has already threatened to have a significant impact on growth.

It’s been a mixed start to the day for the UK, with housing data and retail sales figures both looking strong, while manufacturing and industrial production figures were very disappointing. The RICS house price balance figure was the most encouraging this morning, coming out at +21%, meaning more surveyors reporting rising house prices than at any point since January 2010.

The manufacturing and industrial production figures were surprisingly poor, given the improvement seen in the PMIs in recent months. That said, they do show once again that PMIs, while generally being a good indication of future data, are not entirely reliable. The sector does look to have improved in the second quarter, although maybe not as much as we first thought.

Next up we have the second quarter GDP estimate from NIESR. While there are no official analyst forecasts for this release, the general consensus seems to be for growth at around 0.5-0.6% for the second quarter.

Ahead of the open we expect to see the S&P up 7 points, the Dow up 54 points and the NASDAQ up 11 points.