Europe set for lower open as investors look to Greece once again

After yesterday’s important trading data out of Europe, the UK and the US, today’s session could be a little more subdued. Yesterday saw CPI readings from both the US and UK, with both coming in showing a 0.0% inflation rate. Both readings were seen as positive numbers, the UK as it managed to stave off deflation for another month and the US because it returned into positive territory.

The move in US inflation will be seen as a positive one, and in a market where positive news is met with fall a in equity markets due to the fact it brings a rate hike closer, its no surprise to see that the Dow slipped over 100 points lower last night. Janet Yellen had explained that until she sees inflation showing signs that it can return to the 2% benchmark in the near term then she will not be able to raise interest rates. The figure was not confirmation that this can happen but most certainly a step in the right direction.

In the UK it was a similar inflation story, managing to just stave off deflation by posting a 0.0% gain for the first time on record. Lower oil prices and energy costs have caused a global decline in inflation figures and with this a constant thorn in the side of central banks it seems to be one of the key drivers behind low interest rates for longer. The inflation situation is like to be a key battle ground during the general election and with polls still incredibly tight it could be small differences, like staving off deflation that helps the Conservative party gain more traction.

Today’s session will be dominated by Germany and the ongoing discussions between Greece and its creditors. Interestingly this morning will see the IFO business climate numbers released from Germany. Last weeks ZEW survey showed that while in the Eurozone as a whole confidence was strong, due to the start of the QE program, in Germany things were much different. There is a feeling in Germany that they are still footing the bill for the mistakes of others, and the Greek situation is a perfect example of this. Germans are tired of bailing the rest of currency bloc out, and a recent poll showed that over 58% of people now supported a Greek exit from the Eurozone. Talk of war reparations does not help the Greek cause, and the demands of Alexis Tsipras and his bad cop partner Mr Varoufakis have further riled Angela Merkel and her government. On our Openbook network we are currently showing that over 69% of our clients trading the German DAX are buyers, meaning that the power of the QE is stronger than the feeling that a Greek deal won’t be agreed. It also shows that investors currently see any dip back below the 12,000 level as a buying opportunity.

Ahead of the open we expect to see the FTSE100 open lower by 11 points with the German DAX open lower by 40 points.