European markets and the U.S. futures are trading lower this morning. Conflicting reports on the Greek saga continue to dominate the terminals and traders are pretty much used to them by now if not immune. Greece is determined to not to give up anything when it comes to their pension reforms and labour market.
It may not be a bad idea at all to leave the markets all together and wait for one month- ideally till July because it is then when the big payments are due for the ECB. If Greece does not have the cash to pay their bill, then we have a serious problem, because it is the ECB payment which is due in July. Moreover, by then, we will also know if the can has been kicked down the road or not.
The equity market took some beating yesterday when the headline was printed that the IMF has lost their hope when it comes to Greece as there are major differences to resolve any issue and have decided that they are going to return back to Washington. The market is feeling the pain of this today and the news is nothing but a disappointment. It appears that Greek officials are still of the mind frame that the game theory is the best approach for them and they are constantly checking the elasticity of this band. Of course, the concern is how far this can be stretched.
So the question is what can happen next week given that the IMF has walked off from the negotiations. One possibility is that the IMF can return to the table and this will show that negotiations are back on the table and the optimism will rise once again to strike a deal. Finally, Greece can always resubmit their proposal and this will start the negotiations once again or at lest the conflicting headlines will be the main focus.
The economic docket looks a little light today, but nevertheless, it still has a number of events. This morning we will get the UK’s construction output and the forecast is for 0.1% while the previous reading was at 3.9%. Following this, we have the Eurozone industrial production data which is forecast to come much stronger with the reading of 0.4% thanks to the ECB QE. The previous reading was at -0.3%.
Back in the U.S., we had the U.S. retail sales data yesterday, which came pretty much bang in line with the expectations confirming that the U.S. NFP released last week does have a strong foundation to stand. The most important and encouraging element in this data was the import prices which has nudged up.
To further strengthen the view of the Fed that the economy is ready for a rate hike, we have more economic print this afternoon. The PPI and preliminary consumer sentiments are the last piece of the puzzle for this week and once again the forecast for the PPI is for 0.4% and this is on the back of the increase in the wage acceleration and the big bounce in the oil price. The consumer sentiment is also forecast to incline and the improving employment situation can stem the sentiment. The forecast for this is 91.3 while the previous reading was at 90.7