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Nervous Markets Ahead Of Greek Bond Sales

The Greek authorities are considering placing a loan this week. It has been wildly speculated that the German government will guarantee parts of the loan. The result of this placement is likely to influence the direction of the major stock markets.
“The last disappointing economic reports from the U.S. and Europe give reason for concern, but most likely they’re due to temporary factors such as bad weather.”
Orion Securities

“In the short term, we believe the market will move sideways and be characterized by high volatility,” analysts at the Norwegian brokerage firm Orion Securities writes in their weekly macro analysis. There’s a lot of nervousness among investors, and the acute debt problem in Greece have to be solved before the stock markets can make sustainable gains, according to the analyst.

For the S&P’s 500,  the consensus estimates for 2010 P/E is 14.1 falling to 12.0 in 2011.

“With record low interest rates, this appears to be low, and we believe that as 2010 progresses and focus on 2011 increases, the multiplier will expand to 14 – 15.”
“But for this to happen, either share prices must go up or earnings estimates must come down. In comparison the OBX Index is traded at 9.5 times 2010 earnings, falling to 7.9 for 2011. according to our estimates.  We lean against that the share prices will going up, but if we have a new recession it is obvious that the estimates are overestimated.”

“Authorities in Greece are considering placing a loan in the coming weeks where it has been speculated that the German authorities will guarantee a part of the loan. The result of the placement will likely to influence the direction of the stock market,” the analysts concludes.