Fiscal cliff talks seen as “constructive” on Friday
Greek Eurogroup meeting due tomorrow
US Thanksgiving likely to cause liquidity issues through EU summit
Data docket quiet today.
World equities have opened well so far this Monday morning after a late rally in New York on Friday evening. While Barack Obama is making headlines this morning for being the first US President to visit Myanmar, it was chatter around a meeting between him and leaders in the Senate and House of Representatives that sent sentiment higher. Obviously there is a long way to go before the cliff can be thought to have been “avoided” but the increase in sentiment is always welcome.
With the general mood one of cautious optimism this morning, the euro has begun to bounce back having had a poor day on Friday. Risk had come lower through the US session initially following poor US industrial production and TIC flow data, but it will be wholly European concerns that govern the single currency through this week.
Tomorrow sees the Eurogroup meeting where Finance Ministers are expected to finally come to an agreement over the further austerity measures they deem necessary for the Greek economy. Last week it was becoming clearer and clearer that officials within Europe are starting to come round to the market’s belief that some form of further haircut will be needed within Greece. The battle between the North and South will be over whether forgiveness needs more austerity, or whether enough has been done. There is no doubt however that we will see riotous scenes , similar to last week’s in Athens and other peripheral Eurozone cities, should the hardliners win out.
The IMF's Lagarde told reporters over the weekend that any Greek deal should be "rooted in reality, and not in wishful thinking" – she has obviously never met a European politician.
The US thanksgiving holiday (Thursday) throws an interesting curve ball into the market given it is the same day as the EU budget negotiations. Liquidity is always poor the day before and the day after the event and while we forecast that the market will largely trade sideways through the opening of the week, the latter part could see some volatility if the classic combination of low liquidity and political idiocy shows up again. The UK is determined to push for a spending freeze whilst other members are looking to go on without us.
Today’s calendar is relatively quiet with Italian industrial orders expected to once again show a wobble in their important manufacturing sector while we look for the US home sales numbers this afternoon to continue the recent improvement in US housing sentiment. All in all, we expect a quiet day with the fireworks saved for later in the week.
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