Earnings now becomes the focus, Greece will remain in the background

Greek banks opened their doors on Tuesday post the agreement between the government and the ECB. Despite this, depositors are still only able to remove four hundred and twenty euro's in a given week from a Greek bank. There remains deep scepticism amongst economic commentators for the long term sustainability of the agreement. Restoring confidence in the banking system is going to be very hard unless the ECB provides some form of reassurance that they stand behind the depositors. Keeping any money In a Greek bank, or depositing further funds currently into the Greek banking system would take a great deal of faith. Post the financial crisis to restore confidence in the UK banks the Bank of England introduced the deposit guarantee scheme, protecting depositors in a regulated bank by up to £85000. It would make sense for the ECB to consider a similar scheme otherwise funds might continue to leak from the Greek banking system, thereby undermining any attempts to restore the economy.

The rest of Europe needs to help provide an environment where business's can access credit for investment. This should then lead to rising employment, promote growth and alleviate social issues, at some stage in the future the debt itself can be addressed. Until more is done at a fundamental level for Greece, equity and bond markets are likely to remain impacted by sentiment towards the Greek economy. These bouts of uncertainty will probably again test investor confidence in the wider markets. History suggests the long term investor should continue to ride these periods  of uncertainty whilst central bankers continue to support global growth.

On Monday equity markets started on a robust footing, after a lacklustre end of the previous week. On Tuesday, equities drifted lower after disappointing earnings from IBM and UTX led to some profit taking. In spite of this the early trend for the second quarter has provided a reasuring picture for corporate health relative to expectations. 

Posted on July 21, 2015 .