February 10, 2017 / 8:50 AM / 6 months ago

Daily Briefing: A new Greek nail-biter

5 Min Read

A Greek national flag flutters as the moon rises in Athens, Greece February 9, 2017.Alkis Konstantinidis

LONDON (Reuters) - Concern that Greece and its lenders are not seeing eye-to-eye on its future have grown in recent weeks, with the yield on its two-year government bond rising above 10 percent.

A comment earlier this week by German Finance Minister Wolfgang Schaeuble that Greece should leave the euro if it cannot fulfil its bailout commitments has rattled investors, as has the continued stand-off between the IMF and euro zone lenders about how to deal with Athens's still-crushing debt load.

Greece's foreign minister on EU affairs George Katrougalos was doing the rounds yesterday, insisting he was confident lenders could make progress at a meeting of euro zone finance ministers next week; past experience suggests there could be some nail-biting times ahead.

Hungarian Prime Minister Viktor Orban will today deliver his annual state of the nation speech, traditionally the platform to lay out policies and the direction ahead. He is heading for elections early next year and his government has already started a fiscal spending spree, including accelerating EU-funded projects.

Ukraine's prime minister, Volodymyr Groysman, heads to Brussels today for meetings with European Union officials. There is lot to talk about, ranging from the sharp rise in violence in eastern Ukraine to expectations of how U.S. President Donald Trump will change the dynamics with it and Russia.

Tackling corruption will also be a theme, as the country awaits an IMF decision on its next big loan disbursement.

U.S. President Donald Trump’s pledge of a “phenomenal” tax announcement in the coming days, along with strong Chinese trade data, pushed Wall Street to record highs and 18-month peaks in Asia, and look set to nudge European bourse higher too.

Investors have been waiting for some substance to Trump’s campaign promise of tax cuts and more spending and, it’s fair to say, have been getting impatient for action.

Apart from lifting stocks, the prospect of lower corporate taxes pushed up Treasury yields and the dollar.

A bigger-than-forecast Chinese trade surplus also cheered stock investors, heralding a strong start to 2017 in the world’s second-largest economy. The 27.5 percent rise in oil exports helped push the price of Brent crude up a few cents to $55.76 a barrel.

It was less positive, however, for gold, which has done well this week thanks to worries about political risks in Europe and about the prospect of ultra-loose central bank monetary policy coming to an end.

Today's meeting between Trump and Japanese Prime Minister Shinzo Abe will be watched for, among other things, any clues to Trump’s view on the desirability of a “strong dollar”.

The greenback is up 0.1 percent against a basket of currencies but well off 14-year highs hit last month. The euro is flat at around $1.0650 but down about 1 percent on the week. Japan’s yen is down 0.5 percent at 113.76 per dollar.

Euro zone government bond yields are heading higher. German 10-year yields up 3 bps at 0.34 percent.

On the company earnings front eyes are on Renault, which posted record full-year sales and profit, setting ambitious new mid-term goals for both, while French software games developer Ubisoft could be under pressure after it cut its full-year sales guidance by 10 percent.

Other French companies also reported results: L'Oreal posted a slightly higher than expected sales growth in 2016 and said it is weighing a possible sale of The Body Shop retail chain, while Kering raised by 15 percent its dividend and predicted an improvement in its cash flow generation this year.

The world's largest steelmaker ArcelorMittal said it was bullish on demand in the United States and Brazil but cautious on China after reporting higher-than-expected core profit for the final quarter of the year.

Other stock movers: Italy opens probe into Telecom Italia-Fastweb broadband deal; Workers strike at BHP's Escondida copper mine in Chile; VW labour bosses step up attack on brand chief; RBS rejects calls for more cash to compensate small businesses; Monte dei Paschi posts 3.4 billion euro loss after loan writedowns; Julius Baer served with 306 million euro claim in embezzlement case; Umicore sees solid growth in 2017 from auto catalysts, batteries; Just Eat boss quits due to "urgent family matters".

Editing by Jeremy Gaunt

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