Asian equity markets are in deeply negative territory at the start of this week as concerns over the Eurozone debt crisis continue to nag at investor confidence. The Nikkei is trading -1.8% whilst the Hang Seng is sharply lower at -4.6%. Today’s public holiday on mainland China means that the Shanghai bourse is closed and temporarily shielded from the losses; but unless there are some surprise developments from Greece today it is likely that Chinese shares will quickly catch up with the sell-off once the exchanges re-open.
That being said, today’s Eurogroup meeting is not expected to yield any significant progress on the Greece saga, or on changes to the EFSF; instead it seems the best we can hope for is another wave of optimistic comments from European officials. The market is however growing weary of empty reassurances concerning the debt crisis, and today’s weakness in the equity markets is a clear sign that more concrete action is going to be needed to calm the current flight to safety. Contributing to the ongoing sense of unease, the release of Greece’s draft budget figures show that the country is facing larger deficits than previously supposed, a realisation that was predicted by the IMF in its latest estimates. This year’s GDP is expected to come in at an ugly -5.5%, and to shrink by -2.0 to -2.5% in 2012. In addition, the deficit is expected to hit 8.5% of GDP this year, well above the 7.6% level that Greece committed to meeting.
Last week, Switzerland’s KOF leading indicator came out much lower than expected, with the headline number dipping to 1.21 compared to forecasts for 1.30 (and down from 1.61 in the month prior). This should be seen as a clear indication of Swiss slowdown when the CHF was at the peak of its strength, and will no doubt boost the SNB’s arguments to maintain the 1.2000 EURCHF floor going forward.
Coming up today, we are expecting a glut of European PMI manufacturing surveys, along with Swiss retail sales, US constructions spending and ISM manufacturing data.
That being said, today’s Eurogroup meeting is not expected to yield any significant progress on the Greece saga, or on changes to the EFSF; instead it seems the best we can hope for is another wave of optimistic comments from European officials. The market is however growing weary of empty reassurances concerning the debt crisis, and today’s weakness in the equity markets is a clear sign that more concrete action is going to be needed to calm the current flight to safety. Contributing to the ongoing sense of unease, the release of Greece’s draft budget figures show that the country is facing larger deficits than previously supposed, a realisation that was predicted by the IMF in its latest estimates. This year’s GDP is expected to come in at an ugly -5.5%, and to shrink by -2.0 to -2.5% in 2012. In addition, the deficit is expected to hit 8.5% of GDP this year, well above the 7.6% level that Greece committed to meeting.
Last week, Switzerland’s KOF leading indicator came out much lower than expected, with the headline number dipping to 1.21 compared to forecasts for 1.30 (and down from 1.61 in the month prior). This should be seen as a clear indication of Swiss slowdown when the CHF was at the peak of its strength, and will no doubt boost the SNB’s arguments to maintain the 1.2000 EURCHF floor going forward.
Coming up today, we are expecting a glut of European PMI manufacturing surveys, along with Swiss retail sales, US constructions spending and ISM manufacturing data.
By
M.Zohaib Gadit
Forex Trading Consultant
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