Greece to miss deficit-reduction target

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The markets have been dealt a blow this morning with the news that Greece will miss the deficit-reduction target demanded as a condition of further bailout payments. In 2012 it was supposed to achieve a budget deficit of no more than 6.5% of GDP. At the moment, it seems that the budget deficit will be at 6.8% at best. now seems the best it will be able to manage. The news has seen equity markets across Europe open at least 2% lower and bank stocks sharply lower as concerns resurface that another credit crunch is around the corner.

Despite the Greek admission, the Euro has remained largely unaffected only down by about half a Japanese Yen and half a US dollar from its position at the end of last week. Against Sterling it is unchanged from Friday's close. The US dollar that has come out on top once again, stronger by nearly two cents against the Euro and half a cent against Sterling compared with its opening level on Friday.

On Friday, the US economic data contributed to the dollar's success. Personal consumption expenditure rose by 0.2% in August, as expected while the Chicago purchasing managers' index was up by nearly four points at a healthy 60.4. The University of Michigan consumer sentiment index was three and a half points better at 59.4.

In the Eurozone a -2.9% monthly fall for German retail sales was unhelpful to the Euro. Higher-than-expected 3.0% inflation did the Euro no good either; a rate cut from the European Central Bank still looks more likely than an increase. Whether the ECB takes Thursday's opportunity to cut rates time will tell.

Today is manufacturing PMI day. China went into an early lead with a small improvement to 51.2 while Australia surely guaranteed bottom position with a one-point fall to 42.3. Switzerland, Germany and the US are expected to deliver figures just above the break even point at 50 with Britain and the rest of Europe coming in a point or two below that level.

Of more interest to most investors will be the outcome of today's EU finance ministers' meeting. No breakthrough is likely but it will be interesting to see how they rationalise continued payments to Greece now the deficit-reduction target has been kicked into touch.