lobal Markets This Morning
European and North American shares were unable to the momentum of yesterday’s Asia Pacific relief rally. Instead, many markets have staged bearish reversals today, opening higher then selling off sharply as the day progressed. This confirms that last week’s botched bailout opened a Pandora’s box of fears over the safety of bank deposits and renewed concerns over whether European politicians are capable of keeping the debt crisis from spiraling out of control.
Concern over a run on Cyprus’s banks has continued to overhang trading overnight. Even if capital controls are implemented the question remains if this will just prolong the run over a longer period of time.
Confusion over whether Cyprus is a special case or the template for future bailouts hasn’t helped sentiment either. The safety of unsecured deposits across Europe is also likely being reconsidered which may cause investors to demand higher returns. This could be confirmed if we see Italian or Spanish yields move back above 5.0% in the coming days.
Rising fears can be seen most clearly in EUR which tried to rally then broke two key support levels today at $1.3000 then $1.2880. Capital moving out of EUR has been finding its way into resource currencies, particularly NZD, AUD and CAD. Gold has also rebounded back above $1,600 after a brief correction. The performance gap between North American and Europe continues to widen and can be seen most clearly in UK crude continuing to narrow its spread with UK crude.
The inability of bulls to capitalize on what would appear to be kind of good news I guess, indicates that overall concerns toward Europe’s financial system and its economy are likely to remain elevated for some time.
The S&P 500 once again was unable to clear its 2007 high and having confirmed resistance, started to roll over again. This could keep the pressure on stocks into Asia Pacific trading today. Capital flows into precious metals, JPY, dollars (including SGD), and to a lesser extent GBP as relatively more stable havens for capital appears to be continuing.
Highlights of overnight announcements include:
There were no major economic announcements overnight.
Upcoming significant announcements include:
8:45 am AEDT NZ Trade Balance street ($12M) vs previous ($305M)
10:00 am AEDT South Korea GDP previous 1.5%
4:00 am AEDT Singapore ind production street (7.9%)
12:00 pm GMT Turkey interest rate decision 5.50% no change expected
1:00 pm GMT Hungary interest rate decision 25 bps cut to 5.00% expected
8:30 am EDT US durable goods orders street 3.9%