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Fed worries boosts optimism!

Published Thursday, February 19th, 2015

A rebound in Greek assets helped European equities rally to a fresh seven-year high on expectations that its left-leaning leaders were expected to ease back from their anti-bailout stance and ask their eurozone creditors for an extension of its programme of financial aid. The move comes as investors fret over the country’s funding needs and the risk of bankruptcy intensifies as the expiry of its existing bailout quickly approaches.

The liquidity crunch facing Greek banks as a result from high levels of outflows also came under the spotlight after the ECB agreed to raise its emergency liquidity provision for Greece’s beleaguered lenders. Despite Greece’s efforts at reaching a compromise, the political game of brinkmanship looks set to endure with Germany seen sticking to its guns and likely to reject any provisos issued by the Greeks.

The upbeat mood across global stock indices was also given a boost from the release of dovish minutes from the Fed’s last policy meeting in which its members expressed wariness towards the downside risks posed by global economic and political uncertainty. Moreover, it warned that the US economy was still at risk from the effects of a low price growth environment which was reflected by data showing that US producer prices fell by 0.8% in January. The cautionary tone, which was also mirrored by its counterparts in the UK, lifted investor sentiment as the timeframe for US rate normalisation was pared back to the latter part of this year.

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.