After falling last week, markets are up this morning, following news that Greece has approved the budget cuts necessary to get its debt write-down and extended emergency aid from Europe.
Clearly it is good news that the Greek parliament approved this package, but the low level of public support is apparent. Politicians should have more explicitly reminded the public that private lenders are taking a voluntary write-down of unprecedented proportions. Burden-sharing is already happening.
The concern is that political unity is very weak now, and remains a threat. If European politicians are unconvinced that the budget measures have enough support to be sustainable, then they might not release the cash. However, that prospect looks difficult to defend right now.
Midweek, we can currently expect Greek aid to be approved. This should support markets moving up moderately. Beyond Greece, we are watching some key macro data this week:
Tuesday
- European industrial production (Dec),
- US Advance Retail Sales (Jan)
- US Business Inventories (Dec)
Wednesday
- European 4Q11 GDP
- US Empire Manufacturing (Feb)
- US Industrial Production (Jan)
- US Capacity Utilisation (Jan)
Thursday
- US Housing Starts, Building Permits (Jan)
- US Philadelphia Fed Index (Feb)
For now, I expect the positive trend to continue, but the direction of the markets remains dependent on data being reported and the headlines around Greece.
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