Good morning,

Markets are pointing higher following the announcement of an approved bailout deal for Greece, saving the country from imminent default in March.  Euro-group finance ministers have approved a €130b bailout package while private bond-holders have agreed to a 53% haircut in a bond swap.

Although an almost immediate default has been avoided, the agreed upon austerity program could serve to be self-defeating given the depth of the cuts necessary to keep the Troika (EU, IMF and ECB) happy.  The minimum wage is being cut 22%, government spending is being cut by 1.5% of GDP while the financial sector will be effectively nationalised in order to boost Tier-1 capital to 9% by Q3, all of which will hinder economic growth.

Greece may have sabotaged its future funding efforts as private investors are now taking a 53% haircut on over €200b in government debt.  Investors will swap existing bonds for longer dated bonds with initially a 2% coupon.  Potential investors will no doubt demand a substantial premium to fund Greece moving forward.

The Aussie dollar has fallen over one-cent against the Loonie following news from Australia that further easing in monetary policy will be necessary should economic growth weaken materially. 

Canadian core retail sales (excludes vehicle sales) were unchanged in December, down from 0.4% in November, as car parts, accessories and tire sales fell nearly 10%.  Meanwhile, wholesale sales grew 0.9%, well above the previous release of -0.3% and expected 0.6%. 

TSX futures are up 0.5% while the Dow is up 0.4%.  Crude Oil has gained 1.5% over the long weekend to $104.80 and Gold has risen 1.25% to $1,745/oz.  The CAD has softened marginally, falling 20 basis points against the USD.