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Where are we headed?

Markets are still looking at the term of the debt repayment between Greece and its creditors on 5 June. Market observers see a deal reachable and a default unlikely to happen. Greek debt resolution will drive all major European Markets up. The week opened under the light of volatility, everything that comes out of the discussions between Bruxelles and Athens may invert any secured daily trend. TWO WORDS: BE CAREFUL. Today, the Finance Minister of Spain Luis de Gundos showed confidence in the reach of a deal and categorically denied any possible GREXIT. Having in mind the peculiarities of European Politics, it is my opinion that surprise can come up at the last moment. Be prepared. Macro indicators were also on the spotlight yesterday. CPI started to increase again in the Euro Area, and Euro strengthened against all currencies. EUR/JPY reached multi-month high, and is trading around 1:138.

German DAX approached yesterday the support line in area 11170, settling a minimum intraday at 11271. Today, the index is performing an interesting pullback, which, in my opinion, can ignite a new bullish break up, if the Greek debt deal would be sealed. I have long positions in DAX through a BNP Paribas Turbo Certificate. For me, Germany is the place to bet in the short term, and Italy in the long run. The problem with German Equities is that they are already pricy. I do not feel comfortable in making long-term predictions on Germany. What I see is DAX at 12000 if Greece may move on from the 5 June repayment. Italy, instead, is still undervalued. Italian Equities are down more than 50% from 2000 levels, and new structural reforms are taking place. Italian Banks are the preferred industry to bet one. I would wait a correction to enter in the FTSEMIB.


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