European shares were slammed overnight as the likelihood of a Greek default increased. Further signs that Greek politicians are wildly out of touch with reality mean global markets are steeling themselves for a worst case scenario. Capital controls are unavoidable without a climb down, and it is increasingly likely that the ancient nation will cede all control of its future due to the unrestrained ego of its population. However, the long lead time to this potential financial disaster has given investors time to prepare, and the major impact of these self-inflicted wounds is to further highlight Europe’s declining relevance to the globe.
Futures markets are indicating a flat start but weaker commodity prices may weigh on shares at this morning’s open. Despite lower prices and better valuations, caution is the watchword. Bargain hunting in the financial sector reversed yesterday’s weakness, but the appetite for banks may evaporate if negative momentum builds.
With few positives on the horizon, bulls will look to the release of the minutes from this month’s RBA meeting as a possible support. The bias of the RBA is not clear, with some analysts arguing a neutral stance while others see a lean to easing. Any confirmation of a more accommodative stance could stop the rot today.
For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.