The leading European equities indices have jumped this morning as reports emerge indicating a deal has been reached to offer Greece a new bailout and keep it in the eurozone.
Germany’s finance minister Wolfgang Schäuble put the question to the Greek government during negotiations, according to a senior member of Greece’s negotiating team.
European equities remain the most popular asset class with European fund selectors, but less people intend to increase their exposure than in the beginning of the year, according to EIE’s freshest data.
“Events in Greece have tipped the balance,” Bank of England Governor, Mark Carney, said on Wednesday as explanation for the Financial Policy Committee’s view that risks to financial stability have worsened.
In the old Road Runner cartoons, Wile E. Coyote spent a lot of time running on air. Having run off a bridge or a cliff, he would remain remarkably buoyant for a while. Then he would look down and, of course, plummet to the floor.
Markets around the world have once again been spooked by Greece as the European Central Bank limited funding over the weekend and capital controls were imposed.
While Europe’s finance ministers were having another round of fruitless Greek bailout talks just a few blocks away, Luxembourg-based fund selectors proved just as divided on Greece’s economic future as Wolfgang Schäuble and Yanis Varoufakis.
Emerging market debt and high yield bonds, which have had some pretty high inflow volatility recently, are now firmly back in favour with European investors. By contrast, net inflows into investment grade bonds are slowing down.
As Greece is heading for a default, which would significantly increase the possibility for the country to be forced out of the eurozone, markets have plummeted. This is not at all surprising, considering Europe’s fund buyers have consistently been telling us they will decrease their allocations to both bonds and equities if a Grexit appears likely.
Barry Norris, the European equity manager and co-founder of London-based investment boutique Argonaut, is one of the most outspoken proponents of a Grexit. The refusal of the current ‘communist’ Greek government to commit to reforms means the country’s economy could never be able to stand on its own feet if it stays in the eurozone, Norris believes.