Optimism Mixed With Cautious Trading As The Greek Situation Remains Uncertain

by ecPulse.com

Optimism mixed with uncertainty in the market, where we can see the euro is fluctuating within narrow levels; however, European stocks were able to record gains and now European markets depends on any improvement in the Greek-debt talks with creditors and also as the Greek Premier meets the leaders of the Greek political parties, discussing the terms required by international lenders to obtain the second bailout funds.

Time is running out and now markets are very focused on the Greek financial situation, where despite the fact that debt-talks extended for a long period of time, the situation is getting more complicated as the wheel of time keeps on turning and now Greek officials must reach an internal agreement among the ruling parties and must also reach an external agreement with international lenders and the private sector.

The Greek Prime Minister is to meet with the leaders of the Greek political parties today, negotiating the terms and conditions of the second bailout package required by the International Monetary Fund, the European Union and the European Central Bank in order for Greece to be eligible to get the financial aid needed so Greece can avert a financial disaster in March.

Political leaders must approve an additional 1.5% cut of the total gross domestic product suggested by the Greek Prime Minister, Lucas Papademos, who attempts to meet the budget targets and reduce the highest debt-to-GDP ratio in the euro zone to 120% by 2020.

Moreover, the sentiment is still highly uncertain as markets are still waiting for the results of the Greek debt-talks with the private sector over the percentage haircuts and the coupon rate to be paid on the new 30-year bonds to be issued in exchange for the existing Greek debt holding, where according to a person familiar to the matter, the private sector is prepared to accept 3.6% coupon rate on the new bonds, while other reports mentioned that the European national central banks will be involved along with the European Central Bank and the cuts on Greek debt could reach 70% so far.

On the other hand, Greece is still negotiating the terms of the second bailout deal with the international lenders, where the second bailout package which was approved in July and worth 130 billion euros is still suspended as lenders demand the Greek government to sign up to measures ranging from a cut in the minimum wage, lower pensions and immediate layoffs for 15,000 state employees.

Moreover, Germany and Switzerland released some important fundamentals today, adding more pressures on the sentiment to remain mixed, where the Swiss unemployment climbed, yet less than expected which added some positivity to the market; however, Germany released the trade balance figures, which showed that the trade surplus narrowed sharply due to the sharp drop in exports.

Furthermore, German sold 3.29 billion euros of 5-year bonds on an average yield of 0.91%, up slightly from 0.90%, while bid-to-cover ratio dropped to 1.8 according to the Bundesbank; however, the sentiment remained unchanged as the bond sale wasn’t disappointing and came in line with expectations.

As of 06:51 EST, the German DAX index was 0.61% or 41.22 points higher, trading currently around 6795.25 points, led by the financial sector, which added 1.52%. However, the utilities sector shed the most today as the sector lost 0.21%.

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