Confidence Grows As Greek Conservative Party, New Democracy, Leads Race
Danske Markets | May 28, 2012 03:32AM ET
- Six Greek polls released over the weekend show that the Greek conservative party, New Democracy, is leading the race to become the biggest party ahead of the left wing party Syriza. The average of the six polls suggests that New Democracy would get 27.7% of the vote and Syriza 25.0%. The polls also suggest that New Democracy and PASOK together would get around 166 of the seats, clearly enough to form a proeuro majority government in the 300-seat parliament. Note though that there are still three weeks to the election, that more than 10% of the potential voters are still undecided and that Syriza gained a lot of support in the final week in the first round.
- In Ireland new opinion polls ahead of the referendum on the ‘fiscal compact’ from the Irish Times and the Sunday Business Post show the ‘Yes’ lead holding firm at around 57% (after undecided voters are excluded), but the level of ‘Don’t Knows’ is still high. The referendum takes place on Thursday.
- Risk appetite improved slightly on Friday in the European session. The improved sentiment from the European session carried over to the US session, but a minor selloff just before closing sent US equities in negative territory. The S&P500 ended the trade down by 0.2%. The S&P future has increased around 1% in Asian trading. In Asia stock indices are trading with no clear direction this morning. Nikkei is unchanged while Hang Seng is up by 0.2%. Also US bond yields decreased slightly on Friday with 10-year treasury yields ending the week back below 1.75%. In FX markets the EUR/USD has this morning rebounded to around 1.26.
- We have a thin global calendar today with the US closed for Memorial Day and Norway and Denmark also closed. Markets are expected to focus this week on developments in Greece and Spain. The Irish referendum on the fiscal compact is also likely to attract attention this week. In the US, the ISM and the job report on Friday are the week’s main releases.
- In the Scandies, EUR/DKK still trades below 7.432 after the Danish central bank cut interest rates by 10bp. We expect that the current financial stress will continue over the next few months and that the currency safe-haven inflow will continue. Therefore, we expect the central bank to deliver two more independent rate cuts of 10bp over the next couple of months on top of the interest rate reduction of 0.25% in the lending rate that the ECB is expected to trigger automatically in June.
- A heavy macro week in Sweden kicks off with two interesting releases today: April retail sales and trade balance.
- Retail sales in Sweden has risen steadily since September and suggests that private consumption held up pretty well in Q1. However, it would appear that Q2 started on a more modest note (even though consumer confidence had a healthy rebound) as clothing and shoe sales plummeted. We project the first consecutive decline in six months: -0.5 m/m, 1.5% y/y.
- Weakness in the Swedish economy stems mainly from abroad. After the poor final quarter of 2011, January was a welcome relief. But short-lived. February and March disappointed. Our call is for another subdued reading in April of SEK4bn, but we need to point out that there is an upside risk as we could see a correction after an unusually weak March and note also that business surveys regarding the export sector improved in April.
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