Market Update

What is RSS? |

Optimism about today's Greek austerity vote bolstered the FTSE this morning, but be careful not to fall into the classic 'buy on the rumour, sell on the fact' trap.

The FTSE 100 traded at 5832.22 by 11.10am (London time), representing a 1.13% gain from the prior day's close, while the broader FTSE 250 index was 0.96% higher at 11718.05.

Greek austerity vote

Greek prime minister George Papandreou, who won a vote of confidence last week, will be put to the test again today, although this time around with less support from his peers. Four of the five majority seats plan on voting against the austerity plan, which includes harsh tax increases, spending cuts and asset sales.

The outcome for the Greek austerity plan is expected to be announced later this afternoon, but the market is confident that the vote will pass. Even if unsuccessful, rumours suggest that the EU and IMF have surreptitiously agreed on a contingency plan to save the day. Even if a plan is voted in today, successful implementation may prove difficult.

Precise details of the austerity plan will be unveiled on Thursday, but my fear is that a feat of wizardry is required to get Greece back on its feet within the stipulated five-year timeframe.

Business Secretary Vince Cable today warned that Britain would not be immune to a Greek financial collapse, despite not being a member of the eurozone. 'Britain is not (a member) of the eurozone and so we are not giving a running commentary on what they should do and on how they use their financing mechanisms,' Mr Cable told Sky News. 'But clearly we are not insulated. If there were a disorderly collapse in Greece it would affect us directly through trade and indirectly through the banking system, so it is important that this problem is resolved and the combination of measures that's put in place will give Greece time to deal with this very, very difficult problem that they have.' [1]

Banks, miners and commodities rally

Barclays was the best performing bank in the sector this morning, advancing 3% to 249.2p, while Antofagasta, Eurasian and Kazakhmys gained between 2.7% and 3.5%. Miners were boosted by a rally in commodities, which saw September light sweet crude oil (WTI) rise 0.76% to $94.17 a barrel, September high-grade copper climbed 1.2% to $4.157 a pound and July gold gained 0.6% to $1508 a ton.

US pre-market

September Dow and S&P 500 futures were trading marginally higher this morning, suggesting that Wall Street is gearing up for a positive start today. US mortgage applications are due at midday, followed by pending home sales.

Source: [1] Reuters News (29 June 2011)

Plan your day

For further information, try looking at our rundown of today's key Economic Indicators. More in-depth market news is available within our PureDeal platform, as well as a range of free charting and research tools. See our PureDeal Resources section for an overview.

IG Index provides an execution-only service. The material above does not contain (and should not be construed as containing) investment advice or an investment recommendation, or a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Index accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of the above information. Consequently any person acting on it does so entirely at his or her own risk. The research does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. This communication must not be reproduced or further distributed.