Traders switch focus to Greece

TRADERS’ attentions will today turn to the uncertainty of an expected coalition government in Greece.

Greece’s election result last night, which saw the winning left-wing Syriza short of a majority, will not reverse August’s bailout deal but will lead to heightened volatility as Europe’s stock markets watch for signs of any changes to how the bailout conditions will be applied.

Ben May, economist at Oxford Economics, said: ‘Greece undoubtedly faces a rocky future and it will be no mean feat for both Greece and its creditors to ensure that the third bailout lasts its entire planned duration.’

the two largest opposing parties – Syriza and centre-right New Democracy – have already committed to implementing the conditions of the £60bn bailout set out in August but it is the finer detail of how the conditions of the bailout will actually be applied that could cause problems. Greece’s bailout review is due next month. It must also repay about £940m of International Monetary Fund loans in December.

the markets will also be braced for new data on how Europe and China’s growth is progressing.

Manufacturing output updates are due from China and Germany this week.

If China’s data on Wednesday comes in below expectations it would signal a further deterioration in the world’s second- biggest economy which could trigger another market sell-off.

Exane BNP Paribas economists warned that investors should not pin their hopes on anything more than ‘ stable’ figures from China’s manufacturing purchasing managers’ index this week. they highlight continued weak industrial conditions and the effect of recent factory closures which are still impacting the country.