The Germans continue to pick up a fuss about the ECB's involvement in Greece's debt restructuring as they refuse to let the eurozone's central bank take haircuts on their share of the Greek bonds they've bought recently. Clearly other bondholders would like to see the ECB take on its fair share of the write downs in order to try and achieve the difficult task of putting Greece back on the road to fiscal repair, but with the Germans being the ECB's biggest share holder they are reluctant to have the central bank partake. For them this would be the beginning of Germany having to open its coffers and expose its taxpayers to the other bailed out countries who will almost certainly want to see a similar deal from them where half their debt it written off. Such a move would almost certainly scupper any chances of the incumbent's of re-election. But as the talks on just how much pain the PSI takes with the bond write downs and just what rate of return will be given on the ludicrously long dated bonds that will replace the existing assets, it's hard to see why the PSI would agree to what's on the table without the ECB taking some sort of a hit as well. As another week draws to a close the lack of agreement is frustrating investors.
At least there have been other things to focus on this week as opposed to the ongoing Greek talks with yesterday's big M & A news that Xstrata and Glencore are planning a tie up. On top of this the much anticipated IPO of Facebook has been gathering momentum and the debate is raging as to whether it'll be a Google type float or a flop. Until we know more about exactly what price they're looking to float at it's a tricky one to evaluate. Advertising revenue from social media sites still remains largely untested and hasn't quite established itself yet. The big names are yet to have ramped build big advertising campaigns for the likes of Facebook, so for now it looks like a bit of a punt on whether this potential will be realised in the next couple of years. But with 850 million users there are plenty of attractions and many people will be eager not to miss the party when the float does happen.
So a flat start to trading today as the FTSE hovers around 5800. Only a few weeks ago many the consensus was that we were due to head lower, the technicals were looking incredibly weak and markets were going to plunge to new depths. Almost everyone was bearish which was the perfect signal to get long and there were many clever people that did buy stocks in the final quarter of 2011. Now it would seem there's a little bit too much bullishness out there as people are talking up the rally and people are pointing out the 20% recovery from the lows saying that we're back in a bull run. It might soon be time for a move to the downside as there's a feeling sentiment might have just got a little too bullish. This is certainly what clients seem to think anyway as they remain firmly in the bear camp selling the FTSE index.
Today's got the US non-farm payroll number which is expected to come in at 150k. This number has been good for the bulls over the past few months and encouragingly the rate of unemployment has dipped back below 9% to 8.5%. This is where it's expected to remain today, so all eyes on the US figure at 13.30 London time today. Last night Ben Bernanke reminded us that the US still faces many challenges to bring unemployment lower which just kept US index gains in check.
FX markets have been rather flat on the whole and this morning EUR/USD is at 1.3150. despite the ongoing talks between the PSI and Greece the single currency has held up pretty well. The NFP today could provide some excitement for currency traders but for now support and resistance in EUR/USD is seen at 1.3100, 1.3020 and 1.3200 respectively.
Gold had a little move to the upside yesterday and reached new near term highs. This morning the precious metal is at 1758 a touch lower, but still very much in its short term bullish uptrend. The bulls must be eying up the 1800 level, but the resistance at 1767 and 1790 needs to be overcome first.