Europe
Share trading was volatile again in Europe; losses on Tuesday erased most of the impressive gains seen on Monday. The prospect of a referendum over reforms in Greece in case bailout talks fail is a cause for concern.
It’s hard to imagine the Greek people effectively voting for the country to default or leave the Eurozone, but it’s not like staying in the Eurozone is doing them much good at the moment. Local government accounts and public pensions are being plundered just to make debt payments, a situation that can’t, and shouldn’t, carry on for long.
The replacement of Yanis Varoufakis with Euclid Tsakalotos at the head of the negotiating table may make for more polite dinner conversations but doesn’t change the substance of the disagreements between Greece and its creditors. It probably is going to come down to a referendum, Athens have their elected mandate and creditors have their stipulations for maintaining the bailout program. The credit talks have become a stalemate, a referendum could allow Syriza to come back to discussion over its debt with more flexibility or walk away.
A slowdown in economic growth meant there was no second day of record highs made in the FTSE 100 where even a massive beat of earnings expectations couldn’t maintain early gains in BP (LONDON:BP).
The first estimate of UK GDP for the first quarter of 2015 indicates growth of 0.3%, a slowdown from the 0.6% seen in Q4. Construction was the main area of weakness and since this is possibly because of a hesitancy to begin new projects before the election, is not of too much concern. Unofficial business surveys are generally pointing to a bounce back in Q2 so while disappointing, the data is not a sign of a derailing of the economy.
BP reported a 20% drop in profits but expectations were a lot worse given oil prices got cut in half since the same period a year ago. Volatility in oil prices allowed BP’s traders to offset the drop in profits from exploration and production.
US
US markets stumbled in early trading as uncertainty built up over the outcome of the Federal Reserve’s latest two-day meeting while shares of Apple (NASDAQ:AAPL) dropped after company beat earnings estimates and increased its capital allocation program.
Apple earned $2.33 per share in the first quarter, beating estimates by $0.17. Revenues for the quarter rose 24% year-over-year to $58 billion vs $56.1 billion consensus forecasts. Notably Apple increased its expected annual shareholder payout to $200bn by increasing it share buyback program to $140 billion from $90 billion, and increased its quarterly dividend to $0.52 per share from $0.47 per share.
FX
The US Dollar was lower across the board with early losses built on by a surprise drop in US consumer confidence in April.
The pound turned lower after the disappointing GDP data but dollar-weakness allowed a return to gains with GBP/USD retaking 1.53.
Commodity currencies saw the most strength with the Australian dollar one of the outperformers as AUD/USD gained as much as 130 pips, running straight toward the 0.80 handle.
Commodities
Gold and silver built on yesterday’s strong gains aided by weakness in the US dollar and a flight to safety ahead of the Fed meeting tomorrow.
Reports that Iran had seized a US cargo vessel didn’t play out in oil markets, with both contracts teetering at 2015 highs with small losses.
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