Market Comments

In mid-morning trading the FTSE 100 is down 65 points, at 6760, as Greece’s banking crisis is starting to seep into the EU.

As funds flow out of Greece the foundations of the eurozone banking system begin to shake. British banks are being dragged into the red as the shockwaves caused by Greece’s crumbling banks can be felt outside the currency union. With no real news regarding Greek national debt being restructured or negotiated, traders are taking their cues from the Athens market by getting out of financial stocks to avoid another round of the debt crisis. As long as Syriza demands debt relief, traders will dump banking stocks.

Shares in Royal Dutch Shell are trading lower after the oil titan posted fourth-quarter adjusted profits that missed analysts' already low estimates. The energy giant has $15 billion worth of spending cuts in the pipeline as the slump in oil price has curtailed its expansion. To keep investors sweet the oil company announced a healthy dividend, but that wasn’t enough to win back traders' confidence as the enormous cut to capital expenditure signals cautious times ahead. Diageo’s first-half update was a touch on the dull side, as marginal growth in the US and stagnation in Europe equated to flat revenue over the period. The drinks company is hoping its expansion in India will compensate for the ailing Chinese business, but this will be difficult to replace. Strong cash flow and a small increase in the interim dividend was welcomed by dealers and the shares are up 1.3% on the day. With the general election in May, IG is offering a binary market on the outcome, which is currently indicating the Conservatives and Labour will win 284 and 282 seats respectively. The SNP might hold the balance of power come May as our market suggests the party will take 32 seats.

We are expecting the Dow Jones to open 10 points higher at 17,200, after the Federal Reserve's statement last night. Traders are pencilling in June for a rate rise from the US central bank, but if energy prices remain weak it could be pushed further out. The US recovery is going to plan, but the Fed's decision will be influenced by factors outside its control.