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China still struggling

Published Thursday, May 21st, 2015

Two of the major uncertainties facing the market were addressed but not resolved yesterday. Moody’s warned that there was a “high likelihood that capital controls and a deposit freeze will be imposed” by Athens. We are now being told by the Greeks that June 5 is the new make or break default deadline when the next IMF payment is due. If the group, represented by the EU President Jean-Claude Juncker, who say that Greece must not leave the eurozone under any circumstances are to be believed then Greece only has to wait and it will get its money. If Wolfgang Schauble is to believed then a default is definitely on the table and a Greek exit would not be a “Lehmans” moment for the eurozone.

The other problem addressed was US interest rates with the release of the latest Federal Reserve minutes which indicate that a June rate rise is highly unlikely. Members of the rate-setting committee do not believe that the very poor 1Q GDP figure is a true reflection of the state of the US economy but they prefer to wait to be sure. They also fear a “tantrum” when they do raise the rate but that fear will be there whether they raise rates in June, September or December.

The ECB found itself in the dock yesterday accused of not disclosing market sensitive information. More accurately, market sensitive information was disclosed but only to a selected few who attended a conference on Monday evening where ECB board member Benoit Coeure revealed that the ECB would be speeding up its bond purchase programme before the summer. The sudden fall in the euro that followed the conference suggests that the comments did not go unnoticed by those privileged enough to hear them.

to read the rest of the report, please click here

Posted by David Hufton