Comment: Sunny intervals are becoming rarer between heavy eurozone showers

By MARTIN FLANAGAN
Published on 19/06/2012 00:00

THE Greek pro-euro, pro-bailout general election victory unfortunately also has an Achilles heel: Nobody thinks it changes much of anything, apart from possibly rearranging the deckchairs on a listing eurozone ship.

That was the reason for see-sawing financial markets yesterday, with the Spanish and Italian indices falling predictably into the red after early gains and London giving up most of its initial advance. Wall Street also wobbled and the euro reversed four days of gains.

This false-dawn-and-fresh-falls syndrome is now well-established. Peripheral eurozone countries’ bailouts, such as those for Greece, Ireland and Portugal, temporarily boost markets, only for pessimism to again take hold.

The recent €100 billion (about £80bn) Spanish bailout? Again, temporary markets relief followed by renewed falls in equities.

A make-or-break Greek election that effectively votes to stay in the euro and implicitly accepts a Draconian austerity programme is initially greeted as Armageddon averted. Then reality kicks in and apocalyptic quotes again dominate the media.

One Scottish economist summed it up by saying the eurozone saga resembles the British weather: damp and depressing interspersed with short bursts of sunshine.

Although the Conservative New Democratic Party won the Greek election, there are big doubts about its ability to form a coalition with leftist partners which can deliver on the bailout’s accompanying austerity programme in a socially‑riven country.

Investor doubts were shown by early profit-taking following the illusory market optimism.

Worryingly, the respites from depression are getting shorter and shorter. Last week’s relief rally in markets on the lifeline to Spain lasted barely a day. Yesterday it was mere hours.

Pessimists are justifiably wondering if Greece’s second election in six weeks is just another intermission in a programme leading inevitably to the country’s exit from the single currency.

The EU mood music has unmistakably shifted in the past few weeks from such a scenario being a disaster for the eurozone to being how well the European Union, including the UK, would be able to cope with it in terms of escalating banking pressures and wider economic pressures.

The reaction of the markets, yet again, is telling us the day of reckoning is not averted, merely postponed.

One new man cannot solve all Man Group’s woes alone

HEDGE funds and private equity, those gunslingers of the stock market, rode high in that happy interlude between the end of the three-year equities’ downturn in 2002 and the Lehman crash in 2008.

The managerial, financial and share price woes at Man Group, the only publicly-quoted hedgie, make those rose-tinted days appear more distant than ever.

But to suppose a new finance director can right things alone is asking too much – even if it is touched with the City stardust of the Sorrell name. Sir Martin’s son Jonathan is taking over the number-crunching reins.

Above all, Man has to show that its flagship AHL computerised trading fund, which lost 2.4 per cent of its value last year, has regained its touch. Otherwise, calls for deeper management changes are likely to be heard again.