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Banks Enjoy Another Day Of Gains On Greek Debt Progress

By CMC Markets (Jasper Lawler)Market OverviewMay 26, 2016 09:00
uk.investing.com/analysis/banks-enjoy-another-day-of-gains-on-greek-debt-progress-200132216
Banks Enjoy Another Day Of Gains On Greek Debt Progress
By CMC Markets (Jasper Lawler)   |  May 26, 2016 09:00
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UK and Europe

Stocks extended gains on Wednesday as a tentative agreement on Greek debt relief and a fresh seven-month high in the price of US oil offered more cause for optimism. Banks were top risers for a second day as markets price-in the earnings benefit of a possible US rate rise in the summer. Banks in the peripheral of Europe most exposed to Greek debt, including Spain’s Banco Santander (MC:SAN), were top performers.

Less exposure to Greece and weak earnings from M&S (LON:MKS) weighed on the FTSE 100, which rose less than its European counterparts. Next (LON:NXT) shares fell in sympathy, with M&S results pointing to stress for UK clothing retailers.

Greek shares rose and the yield on Greek Debt fell after the IMF and Germany deferred a quarrel on Greek debt relief until 2018. A tentative deal has put differences amongst creditors aside in order to allow €10.3bn in relief loans this summer to top up Greek coffers and make debt payments. Greece avoiding another cliff-edge moment is undoubtedly positive for markets, which already face the uncertainty of the Brexit referendum and Spanish elections in June.

Shares of M&S slid as much as 9% after new CEO Steve Rowe warned that plans to revamp its general merchandise division and close stores would hurt near-term profits. The share slump came in spite of the department store announcing it was raising its dividend. The divi rise appears to be exacerbating rather than steadying the drop in shares. The money would be best invested into the turnaround to help secure M&S’ long term profitability.

US

US markets built on yesterday’s gains with a strong open that saw the Dow Jones Industrial Average rise triple digits as data showed an accelerated rise in house prices but a slowdown in the US service sector.

Shares of Microsoft (NASDAQ:MSFT) rose over 1% in response to the tech company’s announcement that it will slash 1,850 jobs in its smartphones unit. The job losses are part of long term plans to scale down the size the phone business bought from Nokia (HE:NOKIA). The announcement is a sign of the stress Microsoft is under to take market share from the two dominant Smartphone operating systems of Apple’s (NASDAQ:AAPL) iOS and Google’s (NASDAQ:GOOGL) Android.

FX

The pound has continued to push higher breaking out across the board as new polls come out suggesting that the “Remain” camp continues to have the edge in the campaign to stay in EU, with their cause being helped by a number of self-inflicted wounds by the divided “Leave” camp. The latest iteration of UK Q1 GDP is also due out tomorrow and expected to show that the UK economy grew 0.4% in Q1

Sterling was supported by interventions from the Institute for Fiscal Studies and the World Trade Organisation outlining the risk of a Brexit. The growing list of institutions warnings on the economic uncertainty of an exit is crowding out a political discussion about the EU’s impact on Britain’s democracy. This is giving the ‘Leave’ campaign an edge over ‘Remain.’

The Canadian dollar is also having a decent day aided by further gains in the oil price which is also helping underpin gains in the Norwegian krone.

The US dollar appears to be taking a bit of a breather after its recent gains, as traders readjust their expectations on the timing of a possible rate rise in June. While yesterday’s decent new home sales helped push the US dollar higher, today’s services PMI data for May would appear to suggest that the US services sector wasn’t able to follow through on the modest rebound seen in April, and this slowdown may well give the Fed pause as we head into June.

Commodities

The price of oil gained ground for a second day, with Brent pushing on $50 per barrel after the department of Energy confirmed a big draw in weekly inventories suggested overnight by the API. US oil stocks fell by 4.2M barrels in the last week, more than the 2.5M forecast. Oil is holding its ground ahead of next week’s OPEC meeting, which is expected to produce no agreement on quotas.

Gold slid for a sixth straight day despite some soft US economic data that casts doubt over the Fed’s inclination to hike rates in June. While equities push higher, despite increased odds of a US rate hike, there is really very little reason to hold onto gold.

DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.

No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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Banks Enjoy Another Day Of Gains On Greek Debt Progress
 

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Banks Enjoy Another Day Of Gains On Greek Debt Progress

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