Europe
The Greek election results were no surprise and were largely priced into markets and alongside improving German business confidence data enabled the German benchmark DAX stock index to start the first full week of life with quantitative easing in the Eurozone at fresh all-time highs.
The true impact of the victory of Syriza will hard to ascertain until there is more news on the renegotiation of the bailout terms between Greece and the Troika. Both sides of the fence have been talking the talk but the likely result is neither Syriza nor the European Union, European Central Bank, and International Monetary Fund end up talking the talk.
Syriza probably won’t manage to bargain a debt-haircut and the Troika will probably have to offer an extension of the bailout; the result will be another muddle through further into Europe’s lost decade to the benefit of nobody.
Any new bailout terms negotiated for Greece by Syriza come-February are unlikely to serve as any encouragement for other anti-austerity parties across Europe but could well be a rallying-point for more voter-dissatisfaction at the inability of the status quo to provide any real solutions.
UK
UK stocks largely brushed off Greek election results on Monday but without the direct benefits of ECB quantitative easing seen on the continent, the FTSE 100 paired back some of the gains from last week’s four month high just shy of 6,850.
Airlines were top performers on bid-speculation after International Airlines Group (LONDON:ICAG) the British Airways-ownerupped the ante on its bid for Aer Lingus (IR:AERL) which could end up being accepted but with a large revenue stream coming from Greece, bottler Coca-Cola HBC was a big faller.
The BA deal looks like it won’t have any competition from Ryanair Hldgs (LONDON:RYA) who have made a number of past bids themselves but could face difficulties getting through competition authorities.
US
International Business Machines (LONDON:IBMI) was topping the Dow Jones Industrial Average on reports that the company will cut around a quarter of its workforce, a gigantic 110,000 people but the index itself was down following Greek uncertainty ahead of a week full of major earnings.
Anti-austerity party Syriza won the Greek elections potentially catalysing further political upset across the continent and more blowback to US corporate foreign earnings
Earnings from Microsoft Corporation (NASDAQ:MSFT) and Texas Instruments Incorporated (NASDAQ:TXN) after the close may mean movements in the Nasdaq will be limited today. The Nasdaq 100 bumped off the 4,300 level just short of the late December peak on Friday so whether the index can reach new all-time highs may largely rest on earnings from tech bellwethers Apple Inc (NASDAQ:AAPL), Google Inc (NASDAQ:GOOGL) and Facebook Inc (NASDAQ:FB) this week.
FX
The US Dollar was mixed on Monday ahead of Durable Goods and confidence data released on Tuesday.
After initially falling when the Greek election results were announced the EUR/USD recovered towards the peak made on Friday at 1.1290. The size of the quantitative easing program announced by the ECB could keep euro upside very limited so any bullish shock would have to come from a more dovish Fed.
GBP/USD was recovering on Monday and appears to have put in a new interim base at 1.4950. Expectations are for little-to-no action from the Bank of England in 2015 after both dissenters dropped the vote for higher rates at the last meeting with inflation at 0.5%. The better than expected retail sales numbers for December imply the UK economy is still moving forward so there is still some limited scope for a rate-hike that could catch this very oversold market off-guard.
Dovish minutes from the Bank of Japan sent USD/JPY higher on Monday but the pair is travelling sideways between 117 and 119 and may not breakout until after the Fed meeting on Wednesday.
Commodities
Minimal market volatility following the Syriza victory in Greece led to reduced safe-haven demand for {{8830|Gold}} and saw the precious metal fall further beneath the 1300 round number on Monday. Gold prices are typically pretty sideways ahead of a Federal Reserve meeting so there maybe scope for a rebound recovering recent losses on Tuesday.
Silver dipped back below $18 per oz on Monday but the strength of the recent run-up would suggest the downside may not get much through the October highs around $17.80 per oz ahead of Wednesday’s Fed meeting.
Having rolled over beneath $2.70 per lb on sub-par Chinese manufacturing data, copper is under renewed pressure and looks like challenging the multi-year lows formed on January 14.
Oil prices lifted off multi-year lows on Monday but the threat of slow international growth and a strong dollar resulting from monetary policy weakening the euro and yen means probability favours new lows this week.
The Brent - WTI premium has widened from Friday after the possibility of a change in Saudi oil policy from the new King went against the large crude inventory build-up in the US.
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