German IFO misses expectations, provides catalyst for riskoff moves

Fundamental View

Last Friday saw the agreement passed, with the Greeks forced into a corner on some of their terms of the extension. The majority of players in the discussions from the Eurogroup seemed fairly sturdy on their position and Varoufakis had little choice other than to present agreeable terms without much room for negotiations. Although the Greeks pushed forward with their terms initially the reality was that the Greek Banking System would not have been able to survive without an agreement, removing a lot of leverage for any further negotiations for terms. Today Greece will submit a compiled list of reform measures which would allow for the release of funding if these are passed. The EU Commission has officially denounced any reports that the reforms have been received, a rumour which was passed over the newswires earlier in the session. The deadline to put these in place has been given by the Eurogroup for the end of April and these also have to be passed through Greek Parliament. This has been highlighted as an area of domestic tension with the Greek Parliament and also within the SYRIZA party itself, adding credibility to the "kicking the can down the road" analogy often associated with US Government shutdowns. This is particularly relevant here if the Greek Government cannot agree and they reach the April/May deadline without a clear result, the risk begins all over again.

Today’s View

Today we saw a continuation of commentary from the Eurogroup; stocks allowed themselves to lift on the back of a deal struck on Friday but we have since encountered a drift lower on the lack of news surrounding the release of Greek terms. The move lower began earlier this morning but met a catalyst in the form of the German IFO readings printing lower across the board. The DAX moved lower to test its pivot level before finding support and consolidating. The afternoon ahead has very little in terms of data- risk so all eyes return to the European situation, waiting on the release of the official release of the list of Greek terms which seems to be the centre of attention. As the week progresses we have plenty more macro-drivers at our disposal such as Yellen’s biannual (6monthly) testament to Congress and the Senate; please note this is likely to be an arduous affair with only the first speech being anything worthy of note. The most important release for today is likely to be Existing Home Sales for the month of January at 1500 GMT. The January sales are expected to post a fall on the month on month and likely to be lower than expected due to the winter weather. The seasonal rush to exchange and complete before the Christmas period has finished to a drop is both likely and almost expected.