Greek odyssey to dominate the week ahead

Friday’s news that US GDP growth had slowed to 2.6% in the fourth quarter is likely to have a bearing on markets on Monday. Barack Obama will announce the US budget later today, and it is expected that he will aim to introduce tax hikes on top earners and modest increases for middle income earners. Although Mr Obama is hamstrung in Congress, this budget represents a chance for him to test Republicans resolve with regards to finding bi-partisan solutions during his remaining time in office.

Spanish banks suffered losses in the middle of last week, a fallout from the continuing uncertainty over Greece’s position within the Eurozone. Friday’s press conference between Greek Finance Minister Yanis Varoufakis and Jeroen Dijsslbloem, the Dutch representative of the Eurogroup is feared to have exacerbated differences between Greece and many of its EU partners. Varoufakis’ announcement that Greece would turn down an extension to the country’s bailout programme appears to have blindsided many involved with the negotiations, and markets will be watching closely this week to see if the tone from the Greeks becomes more conciliatory. Hopes were dashed on Sunday however, when Varoufakis- speaking in Paris ahead of a meeting with French Finance Minister Sapin- compared previous Greek refinancing arrangements to that of “addicts craving the next fix.” Such rhetoric is unlikely to curry favour with the country’s creditors-or indeed the markets.

In Spain, Friday’s positive GDP figures were accompanied by the upbeat prediction that growth estimates for 2015 may be revised upwards to 3%. It is the latest piece of positive news for the Spanish economy, which saw Q4 growth of 0.7% on the previous quarter and 2% compared with the previous year.

Monday sees the publication of the Eurozone Manufacturing PMI which may provide a barometer of where the markets are headed this week. It is expected that there will be a slight expansion in the euro area, due to improved conditions in Germany, although France and Italy are expected to remain in a state of contraction.

The IBEX 35 opened down-0.88% in early trading at 10.311,50.

The euro was slightly up against the dollar (0.09%) trading at $1.1315.

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