The wait may be over for a formalization of the 130-billion-euro aid package for Greece to avoid a default in March. Bloomberg reports on Saturday that the Greek government has found the additional cuts to bring spending down to $427 million, a requirement led by Germany as part of further aid.
Futures markets and currencies are welcoming news on Sunday of approval for further austerity measures in the Greek parliament. The news could support the markets but earnings will still dominate over the next week.
Emerging market funds posted their sixth week of inflows last week as the risk trade continues its momentum on strong economic data out of the United States. Funds investing in emerging markets increased holdings by $2.6 billion, with China attracting the most inflows.
The markets anxiously waited but got no relief on the deal between Greece and the Institute of International Finance (IIF), the organization representing private debt holders. With the S&P 500 now up 19.6% off its November lows and the euro up about 4.5% against the dollar over the last couple of weeks, the market could see a significant sell-off if the news is less than optimal.
The World Bank is making $27 billion in funding available over the next two years for countries of emerging Europe and Central Asia impacted by the euro zone crisis.
The Chinese New Year starts this week with the year of the Water Dragon. This will limit the amount of market-moving releases from the country this week and spawn a myriad of Feng Shui inspired stories about making money after a jittery year of the rabbit.
The focus of the global markets shifts from macro data to earnings this week, but China in particular will deliver some closely watched numbers and Brazil’s interest rate meeting will also be scrutinized by traders looking for hints of stimulus ahead.
Investors do not seem to care that growth should continue at a relatively strong pace and whether reserve ratios are strong enough to weather the storm in developed markets. It is a “risk off” world and the emerging markets have gotten pounded.
Any Asia outlook piece is sure to address the sustainability of China as the proverbial Atlas carrying the world on his shoulders. The consensus is for slower growth next year, but for every note claiming a manageable reduction in growth there is another foretelling a crash to the bottom.