Stock futures are under pressure in conjunction with a sell-off in Europe, where sentiment has soured in response to news that eurozone leaders still have unmet demands for Greece and want the austerity measures signed into law before more bailout funds are released to the flagging country. That has many market participants concerned about the potential for another debacle by Greece’s parliament.
In a note out this morning, Elsa Lignos, currency strategist at RBC in London, says that “despite headlines suggesting the Eurogroup rejected Greece’s measures, the reality is more nuanced.”
That reality means there is simply more work to be done, which, she says, should still get done – even if it’s just seconds before the ticking time bomb known as a “disorderly default” is set to go off.
Dow futures are off 103 points, S&P 500 futures ticked down 14 points and Nasdaq 100 futures are down 22 points.
Here’s more from Lignos on what the Eurogroup really said and her take on how it will all play out:
The Eurogroup set 3 conditions for signing the second bailout: (1) the measures have to be approved by the Greek Parliament; (2) Greece has to finalise the remaining EUR600mn of measures highlighted yesterday (down from EUR625mn); (3) the Eurogroup expects the three party leaders to agree in writing (preempting post-election changes of heart). Half of the EUR600mn measures are still expected to come from pensions and now Greek officials are working on a plan for the remaining EUR300mn. The three strands will move in parallel: (1) Parliament will discuss the new measures on Sunday/Monday and we expect them to be voted through early next week (we will get No votes from within the coalition but the margins are wide enough and the bill will be a single Article so it’s a simple yes/no). (2) The bill put to parliament will authorise the govt to decide the remaining EUR600mn measures so these may be finalised after the Parliamentary vote. (3) The three leaders (Pasok, ND, Laos) will be pressed to sign the agreement. Pasok and ND will sign. Laos is the wild card – the Laos leader is due to hold a press conference at 6.30am ET where he could announce anything including a withdrawal of his ministers from the cabinet or his party from the coalition altogether – but note Laos has only 16 seats in Parliament and the coalition majority is 80+ so fade excessive weakness on the news.
The target is to get all this done by 15 Feb when the Eurogroup is set to meet again – with that in place (and the PSI formally announced), leaders will be ready to sign the second bailout. It is not clear how they will deal with the shortfall created by worse growth, <100% take-up in the PSI and the new reduced privatisation targets for 2015 (minus EUR31bn) – given how reluctant member states are to commit to more than the EUR130bn promised to Greece in October but we expect the bailout deal to be fudged in the best European tradition (e.g., the bailout covering a shorter timeframe than originally anticipated).
Microsoft [MSFT 30.77
]– Barclays raised its price target on the tech giant to $33 from $29.
LinkedIn[LNKD 76.39
Citigroup [C 33.66
Expedia [EXPE 34.16
Apple [AAPL 493.17
Activision Blizzard [ATVI 12.66
Procter & Gamble [PG 64.04
Zynga [ZNGA 13.25
Nuance [NUAN 30.45
NYSE Euronext [NYX 27.69
Alcatel-Lucent [ALU 1.94
True Religion [TRLG 36.74
- Reuters/UMich consumer sentiment data are due at 9:55 a.m. This is a preliminary reading for February. Economists are expecting sentiment narrowed to 74.0 from 75.0 at the end of January.
- Federal budget figures are due at 2:00 p.m.