European markets recover from opening weakness on rapidly changing Greek situation
City Index November 3, 2011 7:01 PM
<p>European stock markets recovered from early weakness of 1% to trade higher by 10am as investors continued to react to the rapidly changing situation in […]</p>
European stock markets recovered from early weakness of 1% to trade higher by 10am as investors continued to react to the rapidly changing situation in Greece.
Financial markets had opened heavily lower following on from 2% falls in Asian trade after a pre-G20 meeting in Cannes between Greek PM George Papandreou, Angela Merkel and Nicoloas Sarkozy evolved the intended referendum from a vote on the EU bailout plans to a vote on Greece’s membership to the euro itself.
Moreover, calls to suspend all Greek aid until the result of the referendum, which is set to take place on December 4 or 5, though subject to change on a daily basis it seems, has also kept market sentiment fragile.
However, the markets started to find some support and recovered from their earlier woes on news that Mr Papandreou had called an emergency cabinet meeting amidst speculation that he was losing support from his own party and could call for a snap election, an election which could put any referendum to bed and may result in a new stronger coalition government being formed. Of course this is just mere speculation but at a time of intense rumour, investors are being forced to listen to any rumour or rhetoric out of the region to help them to second guess what may happen to the Greek government and its fiscal choices.
The seeming full opposition to Mr Papandreou’s referendum plans from his own finance minister Evangelos Venizelos, who publicly stated on Tuesday that he was not told about the referendum plans in advance of the announcement, has further weakened the PM’s position today.
The key point here is that the Greece situation is changing on an hourly basis and whilst investors await the output of the emergency cabinet meeting called by the Greek PM this morning, traders are refraining from much activity with the markets trading particularly choppy until they know any definitive actions.
The unpredictability of the Greece situation is forcing investors to stay on the sidelines.
Will Draghi deliver an ECB rate cut?
Mario Draghi steps up to his first ECB rate decision today as the new ECB President amidst stormy Euro zone waters, and with much of the investment world awaiting rate cuts. Whilst there is a small chance of a rate cut, the market is expected Mr Draghi to use this policy meeting to lay the foundations for a cut in rates in the near term. His press conference, which follows the rate decision, will be eagerly watched, particularly if he is willing to give the market as many clues as to their intended rate path as previous President Jean Claude Trichet and if he evolves the ECB’s bond buying programme.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.