Greek election shaping as a game-changer

15.16 AEST, Friday 15 June 2012

Greek election shaping as a game-changer

By Tim Waterer (Senior Trader, CMC Markets)

Financial markets seemingly have a modicum of preparedness heading into the Greek elections, having taken some comfort in the knowledge that central banks have their finger on the liquidity-injection trigger should things turn pear shaped at the ballot.

The Greek election shapes as a game changer for the market, and the wavering sentiment on display this week is consistent with traders being unsure how much risk to have in their portfolio heading into the event. The elections pose the first hurdle next week, however there is a second due in the form of an FOMC meeting.

Expectations of further easing measures in the US continues to gather momentum, which is keeping the US Dollar suppressed even in the lead up to a potentially significant risk-off event such as what looms in Greece, should the New Democracy party fall short.

With the US Dollar constrained by growing QE anticipation, the oil price has found some breathing space to the upside, particularly with OPEC waiting in the wings to reduce production to support the price if needed. It looks like we may have established a base of sorts after the recent downward spiral.

Traders on the local market were mostly fence-sitting to end the week, and justifiably so given we are on the doorstep of the Greek elections with the outcome likely to shape market sentiment over the short term. The ASX200 showed more of an even keel this week in comparison to the greater than 1% daily moves on the US market which became the norm. However the indifferent showing of our index this week could likely be a thing of the past once the Greek election results come in.

Energy stocks saw some more interest today on the back of a better performance from the crude oil price in the offshore session. However, for the most part traders were disinclined to take on board new positions for fear of being caught on the wrong side of a large market swing one way or the other come Monday.
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