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Good morning,
Markets are called to open flat this morning. This is what's happening today:
The Brussels summit is the first meeting of European leaders since the Greek parliamentary elections on June 17 when New Democracy leader Antonis Samaras won on his pledge to seek relief from austerity measures imposed on the country while keeping the bailout funds flowing. The Greek prime minister won’t attend the meeting on the advice of his doctors after undergoing surgery to repair a detached retina.
The markets are waiting to see what's going to come out of the of the EU leaders summit at the end of the week. There is talk that the EU leaders will be setting up a banking union. This is something that the markets need to move forward, however it has also been opposed by the Germans so a banking union in Europe is still very questionable. At the G-20 meeting EU leaders vowed to start the process of integrating their banking system, in a bid to calm financial markets and counter criticism that the euro zone isn't doing enough to address its escalating debt crisis.
Chancellor Angela Merkel last week resisted attempts by the leaders of France, Italy and Spain to persuade Germany to accept faster action to ease sovereign-debt worries in the financial markets, delineating divisions on greater euro-area integration. The friction between Germany and the rest of Europe was illustrated on June 22 by the Bundesbank’s opposition to European Central Bank plans to help ailing banks.
France’s Hollande reiterated his support for jointly issued euro-area debt at the meeting, calling the so-called euro bonds “a useful instrument for Europe.” Merkel has consistently rejected the idea as premature.
The EU leaders will tackle the following in the EU summit:
No decisions are expected at the summit, but if leaders agree that there are grounds to push ahead, Barroso, Van Rompuy and the others will be given a further mandate to develop the ideas in greater detail, including more specific timelines.
Van Rompuy has said he hopes to have a more thorough set of plans drawn up by the next EU leaders' summit in October or possibly the one after in December.
"Short term, there is clearly a risk that the summit will disappoint markets yet again. If that were to be the case, I have no doubt that the ECB will step in," said Erik Neilsen, global chief economist at Unicredit.
Stock to watch: Colt Group (122.8p, Price Target 190p)
Colt offers voice and data services over its pan-European fibre optic network both on a wholesale basis (for other carriers) as well as directly to corporates. The current macro-economic environment remains unfavorable but Colt's integrated approach and substantial investment in wholesale data centre capacity sees it well placed to avail of an expected increase in oursourcing by corporates of their ICT requirements and the growth in internet data which needs to be connected, stored and processed. Colt should be able to grow its FCF at a rate faster than the sector average with positive consequence for equity performance.
For more information on Colt or other stocks and bonds we follow, contact our offices on 25688688.
Good day and happy trading!
Kristian Camenzuli
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