All about Greece

This morning’s market action

This morning saw European equities start an important week in optimistic mood with the Eurostoxx and Dax opening 2% above Friday’s close and then pushing further higher to currently reside around 3.3% higher on the day. The positive mood is due to the Greek developments over the weekend where the Greek Government delivered a revised set of proposals ready for the raft of top level meeting scheduled throughout today. There seems to have been movement from the Greek side on concessions to both tax hikes and pensions. Greek stocks opened 8% higher and Greek 2yr yields tightened by almost 400bps in a further sign that markets are beginning to price in significant progress in today’s meetings and a potential Greek solution by the weekend. The safe haven Bund has been under pressure which has led T-Notes below Friday’s low. The Euro has seen the most confusing response with initial upside through the Asian session followed then by a near 100 pip selloff. Currently the single currency has bounced and its back on the opening levels seen overnight. So the Euro is displaying inconsistent movement as the Greek developments unfold and this needs to be factored in as we progress through today. Crude oil has had a very quiet start to the week and sits just below the long term trend line.

Today’s View

This afternoon will be all about Greece. Tsipras is currently meeting with Draghi, Lagard and Junker. Draghi has already this morning announced another raise in ELA funding for Greek banks. Tsipras will then move straight into the Eurogroup meeting where they are hoping to use the weekend’s revised Greek proposal as the basis for sufficient progress towards a deal for it then to be put in front of the Eurozone PMs and presidents at the emergency EU summit starting at 6pm. It goes without saying that Greek headlines will drive market trends throughout the day as the drama unfolds. There is only one data release of any note scheduled with Existing Home Sales due at 15.00. Our view for the afternoon is for sufficient progress to be made on Greece today for this morning’s positive moves to be maintained. Whether or not this ends in a final solution later in the week remains to be seen! We are therefore looking for a long strategy for the S&P500 and short on safe haven T-Notes. We are uncertain about how the Euro will behave and so look for a cautious entry short around the 1.14 handle. For crude oil we look for a short entry just below the $61 handle which is where the 12 month downtrend line is providing resistance.