The rally seems to have stalled for now as investors try to work out whether the Greek bailout is good or bad for all of us.  There are still doubts remaining as to the viability of the plans and last night when US markets returned from their extended week end, they seemed none the wiser as to how to play things either.            

We had been calling the Dow to open above the 13000 level and it briefly flirted with this figure before giving up on the idea.  The uptrend for US and European indices for that matter remains in tact but just this morning there seems to be a little bit of respite for the bulls as they consider their next move.  The slow grind higher so far this year has been impressive and certainly caught quite a few people off guard.  Clients continue to sell into the strength presumably expecting some sort of more prolonged move to the downside at some point and whilst there’s a degree of relief that the Greek issue seems to be finally coming to a resolution, the bulls look like they might just be running out of puff for now.

The FTSE was in sight of the 6000 level earlier this week however it’s been scared off trading at 5920 at the time of writing and whilst many investors still see equities as being cheap, they are showing reluctance to buy at these levels following the recent rally.

The Chancellor at least has something to smile about following the PSNB figures yesterday that came in lower showing a bigger surplus.  The increase in tax receipts is a good sign for the Treasury’s coffers and the coalition’s deficit reduction plans. There might even be a little bit of wriggle room for the Chancellor come budget day in a few weeks time, but judging by his resolve to not waiver from his course to now, it certainly won’t be an early Christmas for British tax payers!

Economic data comes in the form of some French inflation data which we’ve already had. This has come in at slightly lower than expected but is still showing a rise of inflation of over 2% driven by rising oil that has pushed up petrol prices on the continent.  France is also suffering from what our inflation numbers did back in 2011 when VAT was hiked here and now the same is happening for them.

We’ve also had some PMI data from Germany which has come in worse than expected. These numbers are mixed and show that whilst the German economy is in relatively good shape it isn’t immune to a shock.  At least the data does show that they are still in a very strong position.  With the global economy stabilising this will continue to benefit the Germans who are heavily reliant on consumption hungry emerging markets buying their top of the range products, cars in particular.

Also this morning we have the BOE minutes from their latest decision to increase its asset purchase program or quantitative easing.  It will be interesting to see just how people voted on more QE as this will give an indication as to whether we can expect more or less QE in the future.  One thing is for certain and that’s that the BOE have little concern for the rate of inflation and are having to bow to pressure from politicians in order to try and boost growth with more QE.

As we expected, the euro surged against the dollar on the back of the news that Greece were approved of their bailout.  There may have been a case though for profit taking as the single currency failed to maintain the gains and ended the day down 10 points.  The dollar found strength against the yen and shot to a six-month high, as the speculation is that the US economy is growing and the need for quantitative easing may ease up.  This morning USD/JPY is trading at 80.180 and is in a strong uptrend, which could potentially continue.  

The Greek bailout ignited the feel good factor in the markets and sent gold soaring 24.6 dollars to close at 1758.6, not far off the highest level, 1763.2, seen since last November. Already though investors are having doubts over the new deal and these doubts will test the strong performance seen over the last few days.  Currently, the precious metal is trading down at 1756.9.

Like gold, energy markets were buoyant and crude prices were sent higher.  Considering though that most of the boost came towards the settlement could mean that the main driver for black gold is still the situation between Iran and the West.  At time of writing, Brent is trading flat on the day at 121.64.