By Criag Erlam
The week ahead may not be the most interesting from an economic data perspective but that will only draw more focus to two other equally, if not more, important events, the eurogroup meeting and corporate earnings season.
The eurogroup meeting is due to take place later this week and discussions will once again focus around the reform package that Greece must present to its lenders in order to secure the €7.2 bailout in funds agreed under the bailout extension. So far Greek leader Alexis Tsipras has been unable to offer an extensive list of suitable reforms that would keep Greece afloat a little longer and avoid a nasty default.
The odds on Greece defaulting on its debt and leaving the eurozone have grown considerably as a result, although I still remain very doubtful that it will happen. Neither side stands to gain from a "Grexit" and I'm sure that, despite the tough stance until now, Tsipras would rather return to Greece with his tail between his legs than as the person that got it kicked out of the eurozone and into another disastrous financial crisis.
That said, I am no more hopeful that German Finance Minister Wolfgang Schauble that this will be resolved this week. Tsipras and Finance Minister Yanis Varoufakis seem determined to maintain a hard line until they absolutely have to concede defeat, which we're probably only a couple of weeks away from. Greece has large payments due to the IMF in early May, along with public sector and pension payments that it currently will not be able to honour.
This is likely to weigh on sentiment in Europe this week, although potentially not enormously today with futures currently pointing to a stronger opening. The People's Bank of China cut the reserve requirement ratio by 100 basis points on Sunday, which was a much larger cut than people had been expecting. The move has released up to 1.2 trillion yuan into the financial markets which the PBOC hopes will encourage banks to lend more and boost the economy.
The PBOC has been widely expected to announce new stimulus measures following a number of disappointing economic reports but the size of the cut has definitely surprised people. On Friday, the futures market was suggesting that the Shanghai Composite would open around 6% lower, it's currently up more than 1%. That's an incredible swing.
US futures are also currently pointing to the upside as a result of those moves from the PBOC. Whether they will continue these moves will depend largely on this week's earnings reports, with more than a quarter of the S&P 500 releasing results. So far earnings have been much better than was expected but we did get a lot of bank earnings which were expected to be strong. This week will be the real challenge, if we can get through that unscathed, then earnings season may not be as bad as was first feared.
The FTSE is expected to open 33 points higher, the CAC 16 points higher and the DAX 30 points higher.
For a look at all of today's economic events, check out our economic calendar.
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