20/07/2015: Market Update – Greece Stabilizes, Oil Slides and Inflation at 0%

July 20, 2015

Markets were significantly less volatile over the last week, as concerns over Greece and China reduced. This morning Greek banks reopened accompanied with the some of the negotiated reforms, including VAT rises. In the short term the crisis appears to be resolved, however, the structural problems in Greece remain and there may yet be a requirement for a fourth bailout in the future. Negotiations continue regarding a possible “haircut” to the Greek debt. However, this is significantly opposed by the Germans and against the rules of the Eurozone.

In the commodities markets, the oil price has continued to fall, after a successful end to negotiations between Iran and world powers. The result will lift sanctions on Iran, allowing them to export more oil into an already oversupplied market. Gold has reached a five year low, reflecting a consistently falling price since its peak in 2011. Improved confidence and an expectation that US interest rates will rise in the not too distant future have supported the continued fall in the gold price.

The stock markets in China have been more stable over the last week showing that government interventions have worked to calm investors. However, the Chinese stock market has proven to be a significant risk to the global financial markets and the economy. As short term government measures are unwound, investors will no doubt be keeping a close eye on the market reaction.

Index Open Close Change % Change
FTSE 100 6673 6775 +102 +1.5%
S&P 500 2076 2126 +50 +2.4%
Dax 11315 11414 +99 +0.9%
Cac 40 4903 5124 +221 +4.5%
Nikkei 225 19779 20650 +871 +4.4%

 

Inflation data for the UK (CPI) was published last week, falling to 0% in June. The Bank of England anticipates that the headline inflation rate will stay low for short term. However, with the longer term economic situation continuing to improve, they have also advised that the first rate rises are likely to be around the first half of 2016. It has also been stressed that these increases are likely to be gradual and small in magnitude.

Looking forward, the US is expected to release jobless claims data and the UK year on year retail sales will be released on Thursday.