Greece edging closer to a bailout deal with its lenders and a continuation of China’s stock market rebound is setting up US markets for a big move higher on Friday’s open.
On Friday, Chinese regulators threw more of their weight behind the stock market by ordering listed companies to submit plans to stabilise their stock prices. In plain English, companies must explain how they will buy their own stock, namely through buybacks and management and employee purchase schemes.
The Shanghai Composite saw its largest two day gain ever and largest single day gain since 2009 on the back of the latest government moves. Despite the government’s best efforts, the 30% trouncing the market received over the past month is going to be a major overhang for the individual investors that own the bulk of Chinese stocks.
This latest move in China has all the characteristics of a bear market rally. It’s quite conceivable that when companies unhalt their shares and prices reach high enough for shareholders to get close to breakeven, those who are able to, will sell out en masse, and create the next down leg for Chinese markets.
The institutions will likely make a judgement on Greece’s latest proposal for reforms to receive a €53.5bn bailout. France’s President Francois Hollande, who helped Greece craft the proposals, has called them “serious and credible.”
The optimism that a deal is close to be done is being tempered with a sense of confusion over why Greece is proposing something that is essentially what the country voted down less than a week ago. Sceptical MP’s in Germany have implied Greece is agreeing to reforms it won’t implement in order to stave off a looming banking crises.
Shares of PriceSmart Inc (NASDAQ:PSMT) are expected to see a lower open on Friday after the company missed profit estimates while exceeding on revenues.
Fed Chair Janet Yellen will speak about the economic outlook in Cleveland at 5.30pm BST. With tensions high over the possible approval of a Greek bailout over the weekend, Yellen will probably try not to signal any change to her economic outlook. She will receive questions though, so there is some scope for something unexpected.
Futures suggest the:
S&P 500 will open 18 points higher at 2,069 with the
Dow Jones expected to open 146 points higher at 17,694 and the
Nasdaq 100 37 points higher at 4,389.
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.