Market commentary: Talks continue between Greece and creditors

At the time of going to print, European indices opened slightly lower this morning following indices from Asia where shares were trading flat. A PMI reading for China came in lower than expected at 49.1. This has been the third reading in a month which came in below 50.

A PMI reading below 50 indicates that the economy is contracting. Earlier on, US shares did not manage to keep their high levels and closed lower for the day, as investors, analysed the minutes of the Fed. Credit markets were mostly flat.

The minutes of the April meeting as released yesterday indicated that the Federal Reserve expects growth to pick up in the 2nd quarter. So far data has not been consistent and the main question of when the Fed will raise interest rates remains. Even though the US economy feels stronger, the data has not been consistent to indicate such.

A poll by Bloomberg shows that most economists expects a September rate hike. Yellen will be delivering a speech this Friday and analysts will hope to get more clues in this regard.

Yesterday has been a relatively quiet day in terms of data but Greece continues to be in the headlines. The consensus remains that Greece will remain in the Eurozone and even if a situation dubbed as ‘Grexit” had to happen, contagion should be somewhat limited. In the meantime, talks continue between Greece and its creditors.

Latest news suggests that Greece continue to make gradual progress with a deal to be expected by end of May. Angela Merkel and Francois Hollande said in a press conference yesterday that a deal must be concluded by this time.

Today, Angela Merkel and Francois Hollande together with other European leaders will host Prime Minister Tsipras for another round of negotiations. At the end of May Greece needs to make a payment of €1.9 billion in salary and pension payments. Furthermore, Greece has to make a payment on the 5th June of €300 million. A deal is not expected today and at best we should expect a reconvening of a Euro group meeting of finance ministers for next Monday.

In terms of data, we will be looking at the European manufacturing and services data for May. Out of the US, we will await for the Initial Jobless Claims data and Existing Home Sales figures.

This article was issued by Darin Pace, Treasury Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website. 

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