Wednesday update..Risk appetite soft ahead of major events.

  • As Fridays NFP draws closer and we await news on Greece risk appetite has been soft with indices around the world mostly lower. Forex markets were mixed but although EUR/USD held yesterdays lows its struggled to advance much.
  • Overnight the Japanese Tankan Report ( Economic Activity ) was a little softer than anticipated which helped send the Nikkei lower and the JPY higher although no real fireworks. USD/JPY saw lows of 119.41 but has recovered to 119.86 as Japanese stocks also bounced from lows.
  • News from Greece suggests no deal 13×13 bounce house is about to be agreed despite the normal bullish rhetoric from Greek officials. Mrs. Merkel still seems set to lead a hard line on Greek proposals and also to insist on Greek law makers passing agreed reforms before any cash is dispersed . It really will go down to the wire on Greek solvency.
  • I was interested to see this ‘ Zero Hedge’ article on record short EUR positions ( and Gold ). They may be right but it could just be a massive scramble if news is USD negative and or EUR positive this week. Personally I squared up modest EUR/USD shorts yesterday and might just play it that way for a while. Plainly a Grexit would no doubt cause a lot of ructions however much some suggest they expect it, markets would still be shocked.
  • Manufacturing PMI data from China was a whisker better than expected at 50.1 while the HSBC ( unofficial ) number was revised up to 49.7. It suggests China is neither expanding nor contracting right now. Later this morning we get some more European PMI numbers UK numbers maybe have the most market potential.
  • Oil remains very skittish not least as Iran nuclear negotiations continue. So much for the final final deadline which has been extended. I suspect a positive deal is more priced in than not but then again I don’t really know. Some analysts are now predicting $30 or even lower but none of them have a great record on market calls.
Market Summary
  • Forex..USD is trading a touch stronger and the JPY has lost most of its post Tankan gains right now trading at 120.20 after a low of 119.41. EUR/USD 1.0725 as I type so approaching yesterdays lows. GBP/USD more resilient at 1.4810 which sees EUR/GBP back at 0.7240. CAD over 1.27 on weaker oil while the AUD has just cracked 0.76 ( now 0.7592) in what’s looking like a morning shopping list for the USD all round. No great feel for it I’m afraid.
  • Equities..US and Japanese indices lower, China and Europe more positive , the later on stimulus prospects. Wait and see still seems the order of the day.
  • Bonds..US Treasuries steady ( 10 YR. 1.94%) while EZ yields slip. German 10 YR. under 0.2 at 0.189 % this morning and negative yields out to 7 years is hardly a support for the EUR and leaves investors looking elsewhere for any meaningful yield.
Be careful out there as they used to say.

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