Market Comments

Heading into the close the FTSE 100 is down 60 points, as Greek worries knock markets back once again.

UK markets

It has been a day of headlines for Greece, keeping markets on the hop but doing little for the sanity of those condemned to watch every act of this drama being played out. Most of the policymakers involved agree that a default would be a ‘bad thing’ but this is as far as agreement goes. Various suggestions for new tax raising powers or debt consolidations have been aired, but they do little to advance the idea that Greece will manage to remain in the eurozone. Collecting taxes in Greece has proven to be a Herculean task in recent years, and there is no reason to think a new tax will be any different, while getting all relevant creditors to agree a new repayment plan would make herding cats look like the simplest of tasks. A rout in commodity shares, which took their cue from declining raw material prices, hamstrung any attempt by the FTSE to remain above 7000, although easyJet shares did manage to rally thanks to the strong performance of its peer and arch-rival Ryanair.

US markets

US markets remain highly sensitive to any further strength in the US dollar, following Janet Yellen’s comments on Friday. Today’s data has gone some way to suggesting that 2015 will indeed be the year that sees a US rate hike, as consumer confidence, new home sales and core durable goods orders all rose. The latter, up for a second consecutive month, was enough to provoke further buying of the dollar, with a consequent push lower for stocks. Time Warner’s deal with Charter was the main news of the day, but in the face of such major macro developments the news proved to be of limited effectiveness in stemming the selling.

Commodities

Commodities have had little chance against the US dollar today, especially with the US central bank chief now openly backing the idea of higher rates later in the year. The staying power of gold above $1200 last week had always looked rather uncertain, and today’s sharp drop for the metal, which took silver with it, confirms that we are likely to see more downside into month end. It was the dollar move, more than anything else, that hit oil prices, but news that the Iranians plan a production bonanza did not help matters. Oil continues to look highly vulnerable in coming weeks, even as the US driving season gets underway.

FX

The dollar found the strength to push to eight-year highs against the yen during the course of the session, thanks of course to Janet Yellen’s Friday comments. Set against the Bank of Japan, the Fed begins to take on a very hawkish aspect, prompting a breakout beyond Y122 that has held back the currency pair since the beginning of December last year.