Investors bank gains on news of the Greek bailout package

<p>Despite Greece finally securing the much needed bailout package, the blue chip FTSE 100 index failed to gain ground today, although importantly it did remain […]</p>

Despite Greece finally securing the much needed bailout package, the blue chip FTSE 100 index failed to gain ground today, although importantly it did remain above the key level of 5900.

The FTSE 100 closed lower by 17 points at 5928 or 0.3% with the CAC losing 0.2% and the DAX losing 0.58%.

Greece new bailout agreed
Despite over 10 hours of talks, the end result has been the successful agreement of the second instalment of a financial rescue package that Greece will now receive and therefore avoid a messy March default.

Regardless of this good news the European markets failed to take off indicating that this package had already been largely priced into the market and highlighting lingering concerns that although this €130 billion bailout is a short term fix, the long term view is still an unsightly picture with many contingencies still remaining uncertain.

The reaction on the streets of Athens to a permanent oversight of fiscal policy by the Troika is likely to be heated, and the political reaction is still subject to change considering the timing of April’s election. As such, there is no widespread to the Greece’s debt problems by today’s bailout agreement.

Trading volumes on the FTSE100 remained extremely light at around 30% of their average 90 day volume, a sign that investors are trading with the handbrake on and this is adding to the consolidation pattern the FTSE remains locked in.

Risk appetite declined slightly with Banks pulling back from their recent gains, though this was perhaps not surprising considering their strong start to 2012 which has seen the banking sector as a whole rally by over 20%. The Energy sector also suffered at the hands of investors who were keen to take profits acquired in the previous stronger sessions.

Miners did well to sidestep the sell off of riskier assets today thanks to Deutsche Bank raising earnings forecast for the sector in addition to base metal prices, which have had a notably strong start to the year gaining 10- 12%. Deutsche Bank remain bullish on the mining sector on conditions that China will continue to grow, Europe remains united and the US continues to produce strong economic data. The miner Vedanta Resources had a particularly strong day as top gainer on the FTSE 100 up 5.2% as a result.

UK Borrowing figures ease pressure on Osbourne
There was a lack of economic data to guide trading today apart from extremely positive UK borrowing figures, which showed the UK posted its biggest monthly surplus for four years last month.

Public sector net repayments came in much stronger than expected, at £7.75bn last month, an increase on £5.2bn a year ago, coming in above the £6bn expected by many analysts. The fact we have net repayments gaining somewhat greater traction than expected boosts expectations that Chancellor George Osbourne should announce cheerfully in next month’s budget that borrowing for the year should beat target. The news is also a very welcome one for traders considering the threat by Moody’s recently to cut the UK from its top notch credit rating should its fiscal situation not improve.

Tomorrow morning the focus will be resting firmly on the Eurozone with the Bank of England MPC minutes, which will help traders to further gauge voting patterns in the Central Banks latest decision to increase QE2, whilst German and eurozone manufacturing data, alongside US existing homes sales are also likely to be watched.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (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.

For further details see our full non-independent research disclaimer and quarterly summary.