Friday is shaping up to be one of the quieter days of late in terms of news flow

Friday is shaping up to be one of the quieter days of late in terms of news flow and data but with the Greek fiasco appearing to near a conclusion, at least this part of it, I doubt there will be anything boring about the markets today.

The collapse of talks again on Thursday at the eurogroup level and the refusal by EU leaders to negotiate at the summit today – an agreement on a deal is the job of finance ministers, leaders approve any deal – means that any deal before the end of play on Friday is extremely unlikely. A eurogroup meeting has now been arranged for Saturday morning with Sunday evening the latest deadline for a deal to be done.

This means that, assuming no further delays, by the time the markets reopen next week, Greece may have either secured a deal or accepted default to the IMF. This could prompt a significant reaction in the markets, particularly the default scenario, and see them gap at the open on Monday which can be very concerning from a traders perspective.

While until now people have just assumed the deadline will be pushed back – a relatively safe assumption until now given the tendency to do so – it will be very difficult to do so on this occasion due to Greece’s €1.6 billion repayment due to the IMF on Tuesday. Greece does not have the funds to make this repayment which means by then a deal needs to be agreed and ratified by all member parliaments in order for it to avoid defaulting. I’m sure if a deal is agreed on Monday, they will find a way around it – they always do – but even in this scenario, the lack of a deal on Sunday could cause significant market distress.

With all this in mind, I expect to see significant risk aversion this morning with investors preparing for fireworks over the weekend. The rhetoric coming from both camps over the last couple of days doesn’t make for nice reading and many people will be preparing for worst case scenario being if both sides refuse to back down on key issues, most notably pensions, and accept the consequences. This is an outcome many deemed unthinkable only a few months ago that has become a likely scenario as Greece nears the end of its second bailout with no access to further funding.

One of the great risks associated with this is that in the absence of a deal, the ECB could be forced to withdraw its emergency liquidity assistance to Greek banks which would force Greece to impose capital controls and possibly prevent banks from opening on Monday. If negotiations do continue on Monday, it is possible that the ECB could refuse to raise the ceiling on its ELA loans which would apply significant pressure to Greek leaders to get a deal done and also result in capital controls being put in place again.

Needless to say, considering all of this, there is a lot of risk in the markets over this weekend and I do not expect investors to overlook this and will probably opt for the risk averse route today. With comments from officials linked to talks probably pouring out throughout the day, I’m sure there will not be a lack of market volatility, even in the absence of a deal being done or significant data being released.

We should also be very cautious of rumours today as these can cause significant turbulence in the markets and if denied – which they usually are – can cause a sizeable swing in the opposite direction. With such an enormous weekend lying ahead, I would expect to see rumours galore today.

The FTSE is expected to open 17 points lower, the CAC 18 points lower and the DAX 24 points lower.