Signs of Greek cooperation lift European equities, US shares flat, oil lower and ASX futures flat

The Europeans were all excited last night at the suggestion that it might be time for Greece to cave and request an extension to its bailout. For those of you who haven't been following, the new Greek government has put forward what is, in isolation, quite a fine argument as to why borrowing more money to pay back more debt is not particularly logical. However, the reality for any government is that they can't simply ignore deals done by a previous government without risking international economic isolation, which is what would happen if Greece refused to borrow any more money and declared itself bankrupt. As a result of this, European stocks rallied and Greek bond yields dropped a little as some anxieties (remember nothing is concrete yet) were eased regarding the inability for Greece to reach any agreement with its more conventional and traditional Eurozone finance ministers.

Today's first chart shows the vast disparity that has opened up between Germany's DAX index (DAX.I) and Lyxor's Athens 20 ETF (LYMH), which tracks the Greek stock market. Greek banks have been hammered during the hostile period leading up to and after the recent Greek elections. The incumbent cabinet probably doesn't concern itself too much with that, given their ultra-left status as a political party and their claims of rampant corruption within the financial elite of Greece. And this is something that has been forgotten to an extent during these debt-specific bailout talks - regardless of whether or not they accept further funding to pay back debt, Greece needs a way to create a culture of fiscal discipline and transparency in order to become a functioning economy. Even if Greece's debts were reset tomorrow, the country would head in the same direction as it is now due to the systemic culture of corruption and tax avoidance. So while we observe this situation and mock the farcical nature of it given the government has no option but to take on more funding, we must feel for the academic arguments that are being put forward due to the frustration a true reformer would feel trying to lead change in Greece.

Oil was lower last night and I suspect that those betting on a trend higher may be disappointed in the medium-term. If I were sitting on 20% of the world's oil reserves and income from selling it accounted for 50% of my revenues (Saudi Arabia), I would certainly be doing my best to ensure that the world remains addicted to my product. Any rev-heads in the audience (and I know there are a few) can't tell me that they haven't considered adding a couple of cylinders or litres to their next vehicle purchase on the premise that petrol prices may remain this low, and the less resistance there is to continue using older technologies that rely upon oil the better for oil producers, who are ultimately setting the prices right now. Unlike iron ore, where oversupply can't really influence demand at all, oversupply in oil markets can influence demand over time by making technologies tied to oil consumption more attractive versus newer technologies that don't have the economies of scale yet to offer a cheaper alternative to 'cheap' oil.

Berkshire Hathaway (BRK) reported that it has sold off billions of dollars worth of its holdings in Exxon (XOM) and ConocoPhhillips (CON) in the last quarter of 2014, choosing not to take bets on the future of US oil producers in an uncertain price war. For now oil has certainly come off its lows, with WTI crude is sitting at US$51.78 and Brent crude at US$60.22 as per today's second chart, but a clear trend is yet to emerge.

Lastly, minutes of the US Fed's January meeting were released at 6am this morning. As we've been talking about for months, Fed members seem anxious about setting expectations for a rate hike this year when the economy there is still experiencing green-shoots growth. The US dollar sold off slightly on the release.

Today‚Äôs 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.

Upcoming economic announcements: Bank of Japan will release its monthly economic report at 4pm today and the ECB will publish its monetary policy meeting account, all Sydney time.

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