Flemming J. Nielsen
Danske Bank A/S
Market movers today
Focus will remain on Greece. The monitoring institutions need to approve the policy programme submitted by the Greek government for the agreement reached on Friday to be effective. We expect it to be approved but probably not until after market close in Europe. If the programme is not approved, there will be an extraordinary Eurogroup finance minister meeting tomorrow.
The German Ifo index is expected to rise further in February, continuing the trend from Q4 last year. The ZEW index has proved a good indicator for the Ifo index and it continued its climb in February. Fundamentals are providing strong support for the recovery at the moment as the oil price and record-low bond yields give support to consumers, while the sharp weakening of the EUR benefits German companies.
US existing home sales for January are due. They are expected to have fallen a bit after a decent gain in December. Overall US housing continues to be on the soft side, failing to stage a real recovery despite the decline in mortgage rates.
The rest of the week’s main events are Janet Yellen’s testimony to Congress tomorrow, euro and US inflation, euro M3 and credit growth and Chinese PMI.
In Scandinavia focus is on the Danish central bank after the DKK weakened markedly on Friday on speculation about possible capital controls.
Selected market news
On Friday the Eurogroup finance ministers and Greece reached a tentative agreement on extending the current bail-out programme by four months to end- June, see Eurogroup statement on Greece. The agreement is based on Greece fulfilling the conditions in the existing bail-out programme. However, the new Syriza government will have some flexibility in substituting some of the promised policy measures in the current programme with new alternative policy measures, see Financial Times. In addition, the statement indicates that the target for the primary surplus on public finances in 2015 will be cut without mentioning a specific new target. The agreement is conditioned on the three monitoring institutions (EU Council, ECB and IMF) today preliminary approving a policy programme from the Greek government. The Greek government will have to submit a more detailed policy programme for final approval by the monitoring institutions before end-April. The agreement mainly buys the Greek government more time to put together a more detailed programme that complies with the overall targets in the existing bail-out programme. It is still uncertain to what degree the new government will be able to agree on a credible plan and push it through parliament. In addition, the final plan will still have to be approved by the three monitoring institutions and some of the national parliaments.
The tentative agreement between Greece and the Eurogroup finance ministers on Friday has been positive for overall risk sentiment. In the US the stock market moved higher with S&P 500 closing up 0.6%. In Asia most stock markets are also slightly higher this morning. In the FX market the EUR strengthened slightly against the USD but has been largely range-trading in Asian trade this morning.
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