The hot and burning topic among investors during the European session will be Greece. But before that, it is important that we discuss the important piece of economic data which is released this morning for the Chinese economy. The retail and industrial numbers were due this morning and both numbers are lack lustred.
The retail data came in at 10.1%, which was better than the last month , but not a cheering number at all, because it confirmed that the consumption picture is still very weak. The industrial production data came in at 6.1% and the forecast was for 6.0%. So a number which was better than the expectations. However, these numbers do represent very muted picture when you compare the GDP target of 7% and it begs the question if the efforts by the PBOC are sufficient to boost the economic growth.
Back in Europe, yesterday was the perfect example how strangled the equity market is due to the Greek saga and if there is any fruitful deal between the creditors and Greece, we could see a massive rally. Equally important is to remember where the most valuation is, given the sell off which we have seen and the P/E ratios for Greek market, it is incredibly difficult to argue that this market does have strong upside potential and if a deal is established, we could see the Greek market outperforming other markets very easily.
Although we do not know much of the details expect the rumour that Germany has agreed to release some aid and only asking for one economic reform from the Greek side sounds way too good to be true, but it is the correct step in a right direction. So far we have no confirmation of this news, but if we do see further positive improvement today on this end, we could see the second round of equity market inflating today.
The ECB has also raised the ELA ceiling for the Greek banks by another 2.3 billion yesterday and this offset the deposit outflow and will improve the buffer level for the banks. The 2.3 billion is a substantial amount and this certainly points that there has been some progress made between Greece and its creditors, but we are not sure what that is. Mr Tsipras need to make sure that he has the ability to get the deal approved from his parliament when it is on the table because if the rumours are true and we do see a softness from the German side, they want to make sure that such an opportunity is not undercooked.