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Daily Market Report 13/02/2012

European Shares
The early trade has been marked by broad optimism after the Greek government managed to ratify the austerity measures required to avoid a chaotic default, with banking shares among the main beneficiaries. The debt stricken country is expected to receive a more than 70% write down and a swap for 30-year bonds yielding 3.6%, raising questions about what that deal means for the likes of Portugal and Ireland. On Wednesday EU ministers will take the final decision on whether Greece is able to rein its debt level in to the targeted 120% of DGP, but it looks like there is no way back any more. The FTSE 100 is drifting higher today above 5900, reversing Friday’s losses, as investors continue to focus on the Eurozone crisis.
FX
The optimism following the approval of the Greek bill and the general increase in risk appetite gave a boost to the euro hiking it about 300 pips against the US dollar. At 1.3276 at the time of writing the single currency is now heading towards December’s high above 1.3400. The sterling has also benefited against the US Dollar in early trading with the cable trading up at 1.5814 at the time of writing. A close below 1.5730 could open the door for some broader underlying bearish resumption, while back above 1.5900 exposes the October highs by 1.6170 further up. There are some choppy waters ahead for the sterling, as last week’s expansion of QE begins to make itself felt while economic data hints yet more easing could be on the way.

Commodities
In line with equities and the euro, gold strengthened on Monday following the approval of the unpopular bill in Greece. At 1730 this morning key resistance level sits at 1760. A break above that level will open the door to the 1800 area. Key support level for the bears to watch is at 1680. As with gold, Brent was given a boost that pushed it above 118 in early trading, supported by a weaker dollar and the expectations of a revival in demand growth. At the time of writing Brent is down for the day at 117.60.
Today’s Calendar
On the economic front things are a little quite today. Economic data start to pick up tomorrow with the UK CPI and the German ZEW survey highlighting the economic calendar during European hours. On Wednesday UK investors will be watching the release of the domestic labour market report and the BoE inflation report with analysts painting an even gloomier picture of the UK situation.

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