Market commentary: Politics over economics

As we progress through the week, so far the macro arena has been characterised by politics over economics. Noise keeps on coming out of Greece after Syriza’s victory this weekend, yet its effect on the market at large has been subdued.

The Syriza party had mentioned many times that they want to renegotiate their debt restructuring. Yesterday, European finance ministers met in Brussels and the evening news was characterized by respective finance ministers having their say of what they think should be done and what in their opinion is fair.

Whilst Greek markets closed lower on Monday, the major European stock markets closed higher. Yields on the Greek paper climbed whilst elsewhere edged lower. The latter may be explained by a number of factors. 

Fears that a Greek exit from the Eurozone will affect the market have been subdued. Firstly because despite the Syriza victory, analysts believe that Greece will remain in the Eurozone and there is commitment to keep the nation within the euro group. Secondly, because if a Greek exit had to happen, its effect will somehow be contained.

After Draghi announced a full blown QE last Thursday, yesterday he appealed again to euro zone ministers for acceleration of structural reforms. Draghi had vividly stressed over the course of last year that whilst QE will help to fight deflation, long term growth is dependent on structural reforms.

Over in Russia, for the first time in 10 years, the super power has been cut to Junk Status. This had been expected, yet the Ruble sold off. Furthermore, President Obama threatened to renew sanctions on Russia, as violence continued in Ukraine over the weekend.

Yesterday was a relatively quiet day for data, with the only two important figures being the Spanish PPI and the latest German IFO confidence index. The Spanish PPI came in lower than expected whilst the German IFO printed above analyst expectations.

Today, we will await UK GDP figures for the 4th quarter. Out of the US we will await the December Durable goods orders and PMIs for the month of January. The market will also be looking to receive house price data out of the US.

Pfizer, Caterpillar, P&G, AT&T and Apple all report today. Analysts have an average 12 month price target of $124.12 on Apple. As at yesterday’s close it was trading at the $113.10 level.

This article was issued by Darin Pace, Treasury Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.