Surely, this time the European Lucy won’t pull the football at the last second, causing the global markets Charlie Brown to fall flat on his face. Judging by market action, this is the consensus position. Despite a perfect lack of detail, optimism around a “Greek solution” is high, and share markets across the Asia Pacific region are set for gains at the open this morning.
Bond markets are illustrating the anticipated shape of the deal. Generally, bond yields rose, and German ten year bond yields are at six month highs. The notable exceptions are Greek, Italian, Spanish and Portuguese bonds, where yields fell sharply. The clear implication is that investors are expecting a Greek deal without debt haircuts or re-structures. This means capitulation on key savings measures by Greek officials, and is the best result for markets.
A resurgent USD, against AUD and NZD, could also support local trading.
Traders will look to flash manufacturing reads from Japan and China for further direction today. Expectations are for reads a half point either side of the break-even point at 50. Locally, the house price index is expected to show house price gains accelerated to 7.4% in the first quarter of 2015. Any surprises in this data will speak directly to consumer activity, and is potentially market moving. Looking ahead, durable goods orders in the US tonight also have the potential to influence US Fed thinking and therefore the global investor sentiment.
For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.