Once again the Greek tragedy continued to dominate the headlines last week. With intense meetings and negations over the weekend it appears that a agreement has been reached in principle between Greece and it creditors. EU chairman Donald Tusk said leaders agreed “in principle” on negotiations for the bailout. Greece will now have to pass reforms demanded by the Eurozone by Wednesday. The recent Greek referendum adds complications to whether Greece will be able to pass the deal through parliament. German Chancellor Angela Merkel said on Monday morning “the road will be long, and judging by the negotiations tonight, difficult”. Whilst a Grexit maybe have been averted in the short term there are still several hurdles ahead.
Prime Minister Alexis Tsipras has finally agreed a credible bailout deal with Greece’s creditors but there are still several hurdles to overcome. The bailout deal has many caveats, one of which includes a new trust fund set up, managed by Greece, with €50bn of Greek assets. Interestingly this is being encouraged by Germany to be offshore. €25 billion will be allocated to fund recapitalisation of Greek banks, while the other half will go towards reducing Greece’s debt mountain. At the moment the Euro is holding strong and this will continue so long as the deal proves to be sustainable in the short term.
Away from Greece, the other issue for markets at the moment comes from China, who have also shown signs of improvement overnight. Trade data for China was bullish, with exports back into positive territory on the year on year measure. Since the 12th of June the Shanghai Composite has fallen 28%, with a total of 1500 company shares now suspended. Markets will be hoping the positive trend of last night will continue this week as we await key pieces of data including; GDP, industrial production and retail sales all released from the Redback.
Newswires surrounding Greece will continue the dominate the newswire with further comments the Eurogroup meeting. In addition the BoE Credit Conditions Survey will give details on secured and unsecured lending to households, small businesses, non-financial corporations, and non-bank financial firms.