Investors bank gains on news of the Greek bailout package

Despite Greece finally securing the much needed bailout package, the blue chip FTSE 100 index failed to gain ground today, although importantly it did remain above the key level of 5900.

The FTSE 100 closed lower by 17 points at 5928 or 0.3% with the CAC losing 0.2% and the DAX losing 0.58%.

Greece new bailout agreed
Despite over 10 hours of talks, the end result has been the successful agreement of the second instalment of a financial rescue package that Greece will now receive and therefore avoid a messy March default.

Regardless of this good news the European markets failed to take off indicating that this package had already been largely priced into the market and highlighting lingering concerns that although this €130 billion bailout is a short term fix, the long term view is still an unsightly picture with many contingencies still remaining uncertain.

The reaction on the streets of Athens to a permanent oversight of fiscal policy by the Troika is likely to be heated, and the political reaction is still subject to change considering the timing of April’s election. As such, there is no widespread to the Greece’s debt problems by today’s bailout agreement.

Trading volumes on the FTSE100 remained extremely light at around 30% of their average 90 day volume, a sign that investors are trading with the handbrake on and this is adding to the consolidation pattern the FTSE remains locked in.

Risk appetite declined slightly with Banks pulling back from their recent gains, though this was perhaps not surprising considering their strong start to 2012 which has seen the banking sector as a whole rally by over 20%. The Energy sector also suffered at the hands of investors who were keen to take profits acquired in the previous stronger sessions.

Miners did well to sidestep the sell off of riskier assets today thanks to Deutsche Bank raising earnings forecast for the sector in addition to base metal prices, which have had a notably strong start to the year gaining 10- 12%. Deutsche Bank remain bullish on the mining sector on conditions that China will continue to grow, Europe remains united and the US continues to produce strong economic data. The miner Vedanta Resources had a particularly strong day as top gainer on the FTSE 100 up 5.2% as a result.

UK Borrowing figures ease pressure on Osbourne
There was a lack of economic data to guide trading today apart from extremely positive UK borrowing figures, which showed the UK posted its biggest monthly surplus for four years last month.

Public sector net repayments came in much stronger than expected, at £7.75bn last month, an increase on £5.2bn a year ago, coming in above the £6bn expected by many analysts. The fact we have net repayments gaining somewhat greater traction than expected boosts expectations that Chancellor George Osbourne should announce cheerfully in next month’s budget that borrowing for the year should beat target. The news is also a very welcome one for traders considering the threat by Moody’s recently to cut the UK from its top notch credit rating should its fiscal situation not improve.

Tomorrow morning the focus will be resting firmly on the Eurozone with the Bank of England MPC minutes, which will help traders to further gauge voting patterns in the Central Banks latest decision to increase QE2, whilst German and eurozone manufacturing data, alongside US existing homes sales are also likely to be watched.