US stocks lower, European stocks lower on Greek banter, oil edges higher, ASX futures 7 points lower

The recent equity rally that saw the ASX 200 rocket higher to current levels is beginning to look a little exhausted. Today's first chart shows that investors and traders--quite rightly--are taking their foot off the gas, and we can be thankful for that given the unsustainable nature of the recent run. You can see that the RBA's rate cut move further fuelled what would have likely been a rally limited to the beginning of January, so the market has likely gotten ahead of itself and some moderation back to the 5,500 level is probably warranted.

The second chart today puts this recent Australian equity performance into even more perspective. On the first of December 2014 there was a 15.07% 2014 year-to-date disparity between the performance of the US S&P 500 and Australia's ASX 200. That gap has now narrowed to less than 4%.

European equities last night sold off based on the continuing threats going back and forth between Greece (being seen to be refusing continued bailout money on European terms, because that was their election promise) and the coalition of creditors being the ECB, IMF and EC. This will continue to go on for a while, so European equity investors should sit back and grab some popcorn. There are more articles emerging about the increasing odds of Greece leaving the Eurozone, but I certainly don't buy it. Living up to election promises is one thing, but sending the Greek economy back to the Stone Age in the process is another. I think the newly-elected Greek government are doing the right thing (fighting with the gusto of a party that actually thinks it's going to get more money without structural reforms) and the lenders are doing the right thing (looking after the interests of Europe and other borrowers who have accepted equal terms), and it is just a matter of time before Greece is forced to concede. On the surface it looks like a battle of giant egos, but deep down I'm sure the Greeks know they have to comply with further fiscal reform.

Today's third chart acts as a reminder of just how hard European equities ran in January, so don't be put off by a sell-off.

In other news that you might find interesting, the US is starting to talk out of school about arming the Ukrainians (over Angela Merkel's dead body) and Microsoft (MSFT) is in the process of borrowing big while rates are so low, in a debt deal that includes the issuance of 40-year bonds at a rate of just 153 basis points over the equivalent US Treasury yield. Great companies that realise we're still in a once-in-a-lifetime period of ultra-low debt opportunities should make hay while the sun shines - I believe if Microsoft can get away with pricing these bonds this cheaply, it will be a very good thing for the company. 

Today’s charts are taken from the Rivkin Trader platform. 30,000 global instruments available to trade including FX, commodities, index, ETFs and international shares. Trade Australian share CFDs from just $8 or 0.10%. Click here or phone 1300 748 546 to get your free $100,000 demo account.

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