Risk aversion continues to dominate Asian session trading following yesterdays weak Wall Street close. The sell-off in risk correlated trades has been driven primarily by heavy barrage of warnings that expectations for a grand solution at this weekend summits were overdone. Media outlets are reporting that the funds being made available to recapitalize banks could end up being less than €100bn and legal issues might block having the EFSF directly guarantee sovereign debt. In addition, there were rumors/reports that emergency talks between French President Sarkozy, German Chancellor Merkel and officals from the IMF and ECB have stalled. While, German Finance Minister Schaeuble, according to Handelsblatt, has suggested he is no longer ruling out a Greek default and Moody’s Cochrane saying that there was “no chance” for Greece to avoid a default, added to the growing pessimism. And of course the violent images of the Greek protests flashing in every trading floor globally, would naturally make the most resolute Eurozone advocate, insecure. Despite the disappointment, Greek Parliament passed an initial reading of the new austerity measures. Greek 2yr yields rose to record 84% while 2yr CDS rose to a whopping 9200bps (nearly 9100bps higher then Germany).
For the time being, Asian equity markets are deeply lower, meanwhile European equity futures are pointing to a sharply lower open.The Nikkei is down 1.03%, Hang Seng is down -2.61% and Shanghai Composite -2.22%. Commodities were sold heavily as China names were reported to be shorting copper, gold and zinc. The spillover effect was USD buying. EURUSD dropped to 1.3683 from 1.3783 while AUDUSD fell to 1.0148 from 1.0224. EURCHF was able to climb to 1.2473 aided by rampant rumors that the SNB was preparing to resent the 1.2000 "floor". That said, whipsaw trading remains the only dominate trend this week, as headlines continue to bamboozle traders while providing new short term direction (and plenty of talking points). It would only take one well place/timed comment from European officials to reverse the current bearish sentiment.
Coming up in today’s session, the economic calendar picks up with Swedens Unemployment rate, UK retail sales, EU “flash” consumer confidence, Turkeys rate announcement, US initial jobless claims, leading indicator index, Philly fed and Existing home sales.
For the time being, Asian equity markets are deeply lower, meanwhile European equity futures are pointing to a sharply lower open.The Nikkei is down 1.03%, Hang Seng is down -2.61% and Shanghai Composite -2.22%. Commodities were sold heavily as China names were reported to be shorting copper, gold and zinc. The spillover effect was USD buying. EURUSD dropped to 1.3683 from 1.3783 while AUDUSD fell to 1.0148 from 1.0224. EURCHF was able to climb to 1.2473 aided by rampant rumors that the SNB was preparing to resent the 1.2000 "floor". That said, whipsaw trading remains the only dominate trend this week, as headlines continue to bamboozle traders while providing new short term direction (and plenty of talking points). It would only take one well place/timed comment from European officials to reverse the current bearish sentiment.
Coming up in today’s session, the economic calendar picks up with Swedens Unemployment rate, UK retail sales, EU “flash” consumer confidence, Turkeys rate announcement, US initial jobless claims, leading indicator index, Philly fed and Existing home sales.
By
M.Zohaib Gadit
Forex Trading Consultant
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