Greece: Investors are being warned of choppy waters ahead for markets in the coming days
With eurogroup finance ministers talking tough and still no deal sealed with Greece by yesterday evening, investors are being warned of choppy waters ahead for markets in the coming days.
Prime minister Alexis Tsipras was given three days to push new austerity measures through parliament and keep alive Greece’s chances of staying in the euro.
Finance ministers meeting in Brussels demanded that Greece enact economic reforms before opening detailed negotiations on an aid package of at least €74bn.
If Mr Tsipras misses that deadline, Greece faces being suspended from the currency union, said Finnish Finance Minister Alexander Stubb.
“Greece is being given exactly two choices,” Mr Stubb said. “It’s a rather black and white choice.”
Ryan McGrath, head of fixed income at Cantor Fitzgerald Ireland, said that in the absence of a deal overnight that investors today would likely switch out of stockmarkets and into the relative safety of German bonds.
“It looks at this time on Sunday evening that there is no deal. A ‘no deal’ will be a disappointment to markets which were anticipating some sort of agreement on Friday,” Mr McGrath said. “Expect choppy waters ahead,” he said.
He said that the weekend events showed the difficulties that exist in securing a deal. However, he believes that the markets are focusing on what he described as “the ultimate deadline” of July 20, when Greece is scheduled to pay the European Central Bank back a sum of €3.5bn.
Analysts said after the weekend that Greece remains in the eurozone and the worst nightmare facing markets has not been realised.
Stockmarkets and the banking shares in particular have tended to drop amid such uncertainty in the past and the same could happen when trading reopens this morning.
Bond markets in recent weeks have tended to react to continuing uncertainty by selling Italian and bonds of peripheral eurozone countries such as Portugal, and buying German bonds.
Experts say that it remains difficult to call what will happen to yields of Irish bonds in trading today under such circumstances.
Mark O’Byrne, director of research at Gold Core, said that markets had held up reasonably well last week, amid the huge uncertainty about Greece and then the fears raised about the bursting of the stockmarkets in China.
“The China situation added a whole new dimension last week. It is a massive market. It puts into question how they (the Chinese authorities) account for growth figures,” he said.
On Greece, “the only way to solve that is a debt write-down, but that does not seem to be any part of a policy prescription.
“We could be back to this in a few months’ time, and a debt writedown is what they should be doing,” Mr O’Byrne said.
Source: IrishExaminer – Investors braced for ‘choppy waters’ as eurogroup finance ministers discuss Greece
