Relief

Relief
18/06/12 @ 07:19 GMT by Michael Derks, Chief Strategist

Both the single currency in particular and risk assets in general rose overnight in response to the Greek election outcome. There was always a decent prospect that enough Greek voters would use their common sense a second time around, and with risk aversion at an extreme, the potential for a decent short-covering rally was high. The euro is now above 1.27 for the first time in four weeks, and from a technical perspective the price action looks encouraging. High-beta currencies such as the Aussie, for which the short base was also exceptionally high, have also jumped – the AUD is above 1.01, up 5% in the past three weeks. Not surprisingly, both the dollar and the yen have given back some ground whilst the pound has again underperformed. Bond yields of both Italy and Spain are lower in early trading, whilst Bund yields are higher. It remains to be seen how long the relief lasts. Greece remains on a financial precipice, with the government essentially out of money, deposits fleeing the country and tax avoidance now an epidemic. Also, there are justifiable doubts over whether Greek politicians will be able to form a properly-functioning government, one able to actually implement the troika’s demands.

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Commentary

Greek Armageddon on hold. New Democracy leader Samaras faces an enormous challenge over coming days to form a coalition government in Greece after his party won 129 seats of the 300-seat parliament. His first conversation with be with Pasok leader Venizelos, who gained 33 seats. Both leaders clearly understand the gravity of the situation: Greece has been without a fully-functioning government for over two months now and creditors are demanding the implementation of further austerity measures and reforms before releasing the next quarterly disbursement of bailout funds. Without this cash, the Greek government is expected to run out of money within four weeks and will be unable to pay civil servants’ wages and state pensions. Given what is at stake, all parties are likely to negotiate in great detail in order to secure their mandate for a coalition. Regardless of the outcome, there remains a sizable minority in Greece who have expressed their discontent with the current bailout deal. Even under the optimistic scenario of New Democracy forming a workable coalition in the coming days, there are tough times ahead. Furthermore, the New Democracy leader, Samaras, has made clear his intention to gain further concessions on the current bailout deal from the troika, such as measures to support growth. He needs to tread very carefully. Northern Europe is clearly exasperated with Greece, with many policy officials now minded to cut Greece loose.

BoJ keeps its powder dry. Tokyo will no doubt have been disappointed with the jump in the Japanese yen on Friday, mostly in response to the BoJ’s decision to stay its hand on additional monetary easing. Some commentators suspect that the Japanese central bank would have been prepared to inject fresh helicopters drops of liquidity alongside other major central banks should yesterday’s Greek election have delivered another outcome where a strong new government was rendered improbable. Also, with the BoE considering further QE, the Federal Reserve probably also contemplating additional asset purchases and the ECB examining more of those bazooka-esque LTROs, policy officials in Japan will recognise that the yen is attracting some additional short-term safe-haven flows that ordinarily may have gone into the dollar. Although there have been some of the regular protests from the usual suspects (Shirakawa and Nakao for instance), the MoF will be contemplating its options should USD/JPY near the critical 78 level again.

The uncertainty of sterling. Traders and investors are still digesting the numerous announcements made by the chancellor and the Bank of England governor on Thursday. In addition, there is the increased likelihood of further QE next month as well as the message contained in the most recent trade figures. On the latter, the April numbers showed the trade deficit at GBP 10.1bn, just shy of the largest in history. More than 70% of this deterioration was due to the non-EU balance so it can’t be blamed on the eurozone crisis. Exports to China were down 16%, exactly the same as the fall for those to Germany. It’s not a great omen for the second quarter. Thursday’s announcements weighed slightly on the pound although the announcement of an extension of the 6mth liquidity to banks amounted to turning on the taps of the facility announced back in December. On the Treasury scheme to increase bank lending we await more details. What’s interesting is the limited reaction to King’s comment on quantitative easing in which he suggested that “the case for further monetary easing is growing”. For sterling, even if there is further QE, the impact on rates and the real economy is far less certain than was the case with the previous tranches - and even then the impact was unclear. Therefore, even though sterling is weaker, all things considered it’s a modest reaction but probably the correct one.

for now we need to see the greek government formed.

when formed, we continue to see "risk on" trades withing equities and the aussie

watch for gold as ppl unwind safe haven bets and with the yen

now today focus is spain bond yield rising liao

+1

European Stocks Erase Advance On Spain’s Borrowing Costs
By Adria Cimino - Jun 18, 2012 4:34 PM GMT+0800

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European (SXXP) stocks erased their advance as the yield on Spain’s benchmark 10-year bond climbed to 7 percent, amid fading optimism that Greece’s election will calm the euro area’s sovereign-debt crisis. U.S. index futures retreated, while Asian shares advanced.
The Stoxx Europe 600 Index lost 0.2 percent to 243.82 at 9:30 a.m. in London, erasing an earlier rally of as much as 1.1 percent. The gauge has dropped 11 percent from its peak on March 16 on concern that the debt crisis has triggered a slowdown in global economic growth. Futures on the Standard & Poor’s 500 Index expiring in September slipped 0.4 percent today, while the MSCI Asia Pacific Index increased 1.4 percent.
The New Democracy and Pasok parties won enough seats to form a majority in the 300-member parliament, according to an official projection, easing concern that Greek voters would reject the austerity measures needed to qualify for international aid.
New Democracy’s Antonis Samaras will begin his second bid in six weeks to form a coalition.
“The Greek people expressed their will to stay anchored with the euro, remain an integral part of the euro zone and honor the country’s commitments,” Samaras told supporters in Athens yesterday after the election result. “There is no time for petty politics.”
Majority Government
Greece’s new government must emerge quickly from yesterday’s contest, euro-area finance ministers said in a statement. Greece’s international monitors will “return to Athens as soon as a new government is in place to exchange views with the new government on the way forward,” the ministers said in their statement.
Germany’s Foreign Minister, Guido Westerwelle, said the EU may consider giving Greece more time to fix its finances. In an interview with ZDF television, Westerwelle said, “I can imagine we could do something in terms of the time frame, because the standstill that has taken place over the past few weeks has done damage.”
Speaking before a Group of 20 countries meeting in Los Cabos, Mexico, host President Felipe Calderon said that the club of the world’s biggest economies will increase the $430 billion firewall the International Monetary Fund announced in April.
The leaders will issue a statement at the end of their two- day summit tomorrow.
In France, President Francois Hollande’s Socialist Party and its allies won an absolute majority in the National Assembly, exit polls showed.
To contact the reporter on this story: Adria Cimino in Paris at [You must be registered and logged in to see this link.].
To contact the editor responsible for this story: Andrew Rummer at [You must be registered and logged in to see this link.].

i want to pengsan need ambulance =.="

today is stupid reali not following cut loss point & flip point but stick to position, one time no follow immediate kena kaw kaw
my moyang want to teach me a lesson kah??

aam wrote:today is stupid reali not following cut loss point & flip point but stick to position, one time no follow immediate kena kaw kaw
my moyang want to teach me a lesson kah??

it happens to the best of us, hope that the position turns about and when it doesnt hope turns to despair.

u broke your rule once only this time, ensure it doesnt happen again i guess

think of today as shake call not real fall, its senseless
now bloomberg keep nyanyi on tv, spain yield arrr~~~, fueling senseless panic, but spain yield just soar 0.2% nia la, seem realli like shake call, market maker is working i got a hunch

Cals wrote:

aam wrote:today is stupid reali not following cut loss point & flip point but stick to position, one time no follow immediate kena kaw kaw
my moyang want to teach me a lesson kah??

it happens to the best of us, hope that the position turns about and when it doesnt hope turns to despair.

u broke your rule once only this time, ensure it doesnt happen again i guess

i go out afternoon before tat see market doing good morning close 89.0, then 12.40 china mainland open cantik, so i pull cut loss & flip order so tat market not whip the position cos tot market ok, but back by 3.30 tengok,,,,, haizzzzzzzzzZZzz too late dy, 82, then hold on cos feel sureal, then bigger problem lo, hope ralli shake call, tomorow come back

aam wrote:

Cals wrote:

aam wrote:today is stupid reali not following cut loss point & flip point but stick to position, one time no follow immediate kena kaw kaw [You must be registered and logged in to see this image.]
my moyang want to teach me a lesson kah?? [You must be registered and logged in to see this image.]

it happens to the best of us, hope that the position turns about and when it doesnt hope turns to despair.

u broke your rule once only this time, ensure it doesnt happen again i guess

i go out afternoon before tat see market doing good morning close 89.0, then 12.40 china mainland open cantik, so i pull cut loss & flip order so tat market not whip the position cos tot market ok, but back by 3.30 tengok,,,,, haizzzzzzzzzZZzz too late dy, 82, then hold on cos feel sureal, then bigger problem lo, hope ralli shake call, tomorow come back [You must be registered and logged in to see this image.]

tomorrow come back.....[You must be registered and logged in to see this image.]

Wonderful World wrote:

aam wrote:

Cals wrote:

aam wrote:today is stupid reali not following cut loss point & flip point but stick to position, one time no follow immediate kena kaw kaw [You must be registered and logged in to see this image.]
my moyang want to teach me a lesson kah?? [You must be registered and logged in to see this image.]

it happens to the best of us, hope that the position turns about and when it doesnt hope turns to despair.

u broke your rule once only this time, ensure it doesnt happen again i guess

i go out afternoon before tat see market doing good morning close 89.0, then 12.40 china mainland open cantik, so i pull cut loss & flip order so tat market not whip the position cos tot market ok, but back by 3.30 tengok,,,,, haizzzzzzzzzZZzz too late dy, 82, then hold on cos feel sureal, then bigger problem lo, hope ralli shake call, tomorow come back [You must be registered and logged in to see this image.]

tomorrow come back.....[You must be registered and logged in to see this image.]

close 81.5 you are safe worr

what was the entry point?

could have moved the spot above entry to protect since you couldnt monitor

Cals wrote:what was the entry point?

could have moved the spot above entry to protect since you couldnt monitor

my order book today:
entry: L86.5x4
clearing first clearing 89.5, then canceled change to 90.5 cos tot market hiong
cut loss point 82.5. but later canceled
flip point 82.0 but later canceled
now market close at 81.5, lowest 76.5

aam wrote:

Cals wrote:what was the entry point?

could have moved the spot above entry to protect since you couldnt monitor

my order book today:
entry: L86.5x4
clearing first clearing 89.5, then canceled change to 90.5 cos tot market hiong
cut loss point 82.5. but later canceled
flip point 82.0 but later canceled
now market close at 81.5, lowest 76.5

could have move SL above entry 88 to protect gain, then when move below L86.5 open flip short

today market is actually very typical gap high open then retract for 1.5hr then coming slow up within rising channel, whole morning just nice run, but afternoon realli arrr disaster run, weird run, drunk run, kanasai

Cals wrote:

aam wrote:

Cals wrote:what was the entry point?

could have moved the spot above entry to protect since you couldnt monitor

my order book today:
entry: L86.5x4
clearing first clearing 89.5, then canceled change to 90.5 cos tot market hiong
cut loss point 82.5. but later canceled
flip point 82.0 but later canceled
now market close at 81.5, lowest 76.5

could have move SL above entry 88 to protect gain, then when move below L86.5 open flip short

tot market veri hiong marr, morning market realli hiong move nicely, tot europe open in celebration for greece ok, god know they nyanyi another theme on spain bond yield , these world is control by dark force & market maker arr cals

aam wrote:today market is actually very typical gap high open then retract for 1.5hr then coming slow up within rising channel, whole morning just nice run, but afternoon realli arrr disaster run, weird run, drunk run, kanasai

consolidation mode in consolidation channel. its not over yet to this greece TVB drama

tonite in focus:
1. developemnt in greece
2. ecb reaction to rising bond yield across europe (spain,german, ..)
2. G20 summit in Mexico, obama will give policy speech in summit for world economy

we are more concerned if greece can form another gomen for the second time

支那人火箭降落地球...以股災慶祝

Europe Gets Emerging Market Crisis Ultimatum As G-20 Meet
By Theophilos Argitis and Tony Czuczka - Jun 18, 2012 10:44 PM GMT+0800

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Europe’s financial crisis deepened and enveloped Spain, raising pressure on German Chancellor Angela Merkel at a meeting of world leaders to shift her stance on shielding the global economy.
Group of 20 chiefs are meeting at a two-day summit in Mexico today as Spanish borrowing costs soared to a euro-era record. With elections in Greece failing to damp the threat of contagion, policy makers are deliberating ways to stimulate the world economy if necessary, a Canadian official said. Merkel, who last week criticized U.S. debt levels, said June 15 she’ll press the G-20 to hold to prudent government spending.

“It’s not a complete beating up session, but Germany is the recipient of fairly caustic criticism from other members of the G-20,” Rob Carnell, chief international economist at ING Bank NV in London, said by telephone. “The pressure will be on Germany to give more ground and behind closed doors Merkel may well be more accommodative. There is ground for the euro zone to move, but just what it does depends on how much Germany digs its heels in.”
G-20 leaders are gathering in the Mexican Pacific resort of Los Cabos for a summit being dominated by the crisis in the 17- nation euro region that threatens to further erode the weakest global economy since the 2009 recession. Spain’s Prime Minister Mariano Rajoy is also attending, as the respite in markets after elections in Greece yesterday proved short-lived.

Euro Drops
Stocks erased their gains and the euro fell today as Spanish 10-year bond yields leaped above the 7 percent level that forced Greece, Ireland and Portugal to call for sovereign rescues for the first time since the euro’s creation.
G-20 officials met late into the night to discuss a mix of measures to secure the global recovery including deficit reduction for some countries and pledges for additional stimulus by others with sounder finances, the Canadian official said on condition of anonymity because the negotiations are private. Canada was pushing for language in the communique that would call on European nations to take strong action, the official said.
President Barack Obama, who has blamed the crisis “cloud” coming in over the Atlantic for a slowdown in U.S. employment growth, is due to hold talks with Merkel in Los Cabos today at 1:30 p.m. local time, a White House official said.

‘Getting Closer’
“I think we are getting closer to a common position,” Italian Prime Minister Mario Monti told reporters late yesterday upon his arrival in Los Cabos. Growth will be an “important theme” at the summit.
The euro dropped 0.4 percent to $1.2593 as of 3:59 p.m. in Berlin, while the Stoxx Europe 600 Index was little changed after earlier rallying 1.1 percent. The 10-year Spanish yield jumped 29 basis points to 7.13 percent.
World Bank President Robert Zoellick, speaking in Los Cabos yesterday, said that European policy makers bungled their attempt to rescue Spain’s banks. China and Indonesia signaled growing exasperation with more than two years of European crisis-fighting that has failed to stem the threat of global contagion.
“I hope that one way or another our European colleagues will reach an agreement on rigorous methods to manage the crisis,” Indonesian President Susilo Bambang Yudhoyono, who heads Southeast Asia’s biggest economy, said in a speech in the Mexican resort. “The absence of such methods will have unsettling consequences to all of us.”

Boosting Demand
G-20 officials were still negotiating last night on the language to be used in their statement to be issued at the summit’s conclusion. The talks included discussions on using language similar to pledges made at Cannes, France, last year, the Canadian official said. At Cannes, some European countries pledged to reduce deficits while emerging markets and those with healthier finances said they’d boost demand if needed.
Merkel, Monti, Rajoy and French President Francois Hollande, the heads of the four biggest euro economies, next meet in Rome on June 22, before a full European Union summit in Brussels on June 28-29 that will discuss paths to closer political and economic union in a bid to regain market confidence. European Union President Herman Van Rompuy and European Commission President Jose Manuel Barroso are also in Los Cabos.
EU leaders will pledge “to mobilize all levers and instruments” to ensure financial stability and tackle the debt crisis, according to draft conclusions prepared for the Brussels summit.
As countries from the U.S. to China prod euro-area leaders to keep the crisis from spreading, a boost in the International Monetary Fund’s global financial backstop is moving back into focus after Merkel called for the rest of the world to do more. The G-20 will boost the $430 billion firewall the IMF announced in April, Mexican President Felipe Calderon, the meeting’s host, said on June 16.
To contact the reporters on this story: Theophilos Argitis in Los Cabos at [You must be registered and logged in to see this link.]; Tony Czuczka in Los Cabos at [You must be registered and logged in to see this link.]

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Fed Seen Twisting To Risk Management To Spur U.S. Growth
By Craig Torres - Jun 18, 2012 11:23 PM GMT+0800

Federal Reserve officials must choose this week between their best estimates and their worst fears of what will happen to the U.S. economy.
Policy makers will bring new forecasts to their June 19-20 meeting and probably will mark down their April central-tendency estimate for growth of 2.4 percent to 2.9 percent this year. Lurking in the background is the risk of increasing financial stress in Europe and stubbornly high U.S. unemployment that has remained above 8 percent for 40 consecutive months.

All this could prompt them to move away from their outlook for moderate growth and tilt toward a “risk-management” strategy pioneered by former Fed Chairman Alan Greenspan, which puts more emphasis on tracking and containing high-cost threats. Both Janet Yellen, the Fed’s vice chairman, and William C. Dudley, head of the Federal Reserve Bank of New York, used the phrase in the past month.
“What we are hearing from Vice Chairman Yellen and President Dudley, and the minutes of the last meeting, is that there are more risks on the downside,” said Donald Kohn, the former Fed vice chairman who is now a senior fellow at the Brookings Institution. “The ability to combat weakness with interest rates at the zero lower-bound is limited and uncertain. In a situation like this, their reasoning is you might want to buy some insurance.”

Extend Twist
That insurance may come in the form of extending Operation Twist -- which JPMorgan Chase & Co. and Jefferies & Co. predict -- or an even more aggressive response if Fed officials see high costs in a slowdown of U.S. growth. The $400 billion program, which was announced in September and ends this month, involves selling short-term debt and buying longer-term bonds.
The Fed has about $190 billion of short-term maturities left to continue Operation Twist for another three months, based on calculations by Nomura Securities International Inc. The firm’s forecast is for no extension at the June meeting, with both Chairman Ben S. Bernanke and the Federal Open Market Committee probably indicating they could take additional easing steps, such as outright bond purchases, if economic circumstances warrant.

An extension would fit a forecast that says the U.S. economy will avoid a disaster scenario of rising unemployment and rapidly decelerating inflation. The Fed’s decision June 20 at 12:30 p.m. New York time could be more aggressive than investors expect if policy makers decide their confidence in their own forecasts is low and want to do something extra to lean against a worst-case scenario, said Vincent Reinhart, chief U.S. economist in New York at Morgan Stanley.

‘High Odds’
“We put high odds on them acting at the meeting,” said Reinhart, who was the head of the Fed board’s Division of Monetary Affairs, which develops policy strategy, under chairmen Greenspan and Bernanke. “Risk management says that you act in advance of a potential downdraft in activity because that could trigger” a collapse in demand that would be difficult to escape with the main policy rate at zero. The Fed cut the target for the federal funds rate to a record-low range between zero and 0.25 percent in December 2008.
Financial-market indicators are signaling a flight from risk. Yield spreads on the Credit Suisse U.S. Liquid Corporate Index, which tracks almost 1,300 U.S. investment-grade corporate bonds with an average maturity of about 10 years, widened to as much as 1.865 percentage points over Treasuries of similar maturity this month, the highest since January.


Fading Optimism
Greece’s largest pro-bailout parties, New Democracy and Pasok, won enough seats to forge a parliamentary majority, easing concern the country was headed toward an imminent exit from the euro. Even so, optimism about the election quickly faded as Spain’s 10-year bond yields rose above 7 percent to a euro-era record.
The Standard and Poor’s 500 Index was basically unchanged at 1,343.43 at 11:00 a.m. in New York, while yields on Treasury 30-year bonds fell to the lowest in more than a week. The yield on the benchmark long-term government bond stood at 2.67 percent after reaching 2.65 percent, the lowest since June 8.

In the U.S., payrolls increased by just 69,000 jobs last month, and unemployment rose to 8.2 percent from 8.1 percent in April. Retail sales fell for a second month, with the May total, excluding autos, slumping by the most in two years. Still, few private-sector economists are forecasting another recession. The U.S. will grow between 2 percent and 2.5 percent in each of the remaining three quarters this year, according to the median estimates in a Bloomberg News survey in early June.


Early Boost

Some of the weakness in labor markets could be explained by unseasonably warm weather that boosted hiring earlier this year. Operation Twist has helped increase housing activity, with sales of new and existing homes rising to a 4.96 million seasonally adjusted annual rate in April from 4.51 million a year earlier, based on Bloomberg calculations.
Service industries, which account for about 90 percent of the economy, grew in May, according to the Institute for Supply Management’s index of non-manufacturing businesses.
Fed officials probably won’t have complete confidence in a baseline outlook that’s likely to call for continued moderate growth and perhaps even a faster acceleration next year, said Julia Coronado, chief economist for North America at BNP Paribas in New York.
“What the Fed is worried about is that a seasonal slow patch will be converted into something worse because of the uncertainty over Europe and U.S. fiscal policy,” said Coronado, who worked on the Fed board forecasting staff. “The risks are that we will be disappointed on the downside in the U.S. economy again.”

Stable Inflation

Yellen’s outlook calls for a gradual reduction in the unemployment rate and stable inflation of around 2 percent, she said in a June 6 speech in Boston. Being patient with that forecast may not be desirable, she added.
“Risk-management considerations arising from today’s unusual circumstances strengthen the case for additional accommodation,” she said. “It may well be appropriate to insure against adverse shocks that could push the economy into territory where a self-reinforcing downward spiral of economic weakness would be difficult to arrest.”
Yellen said the FOMC could begin another round of bond purchases or extend its portfolio maturity further if the expansion proceeds at an “insufficient pace.”


Fiscal Cliff

Dudley addressed similar concerns in a May 24 speech before the Council on Foreign Relations in New York. Hazards to U.S. growth are “skewed to the downside, reflecting risks posed by developments in Europe and the impending U.S. fiscal cliff,” he said. “The costs associated with such downside outcomes are likely to be considerably higher than the costs of realizing upside surprises.”
The so-called fiscal cliff includes the expiration of income-tax cuts first enacted under President George W. Bush, the end of payroll-tax reductions and automatic decreases in government expenditures, which would trim a combined 3 percentage points from growth next year if allowed to kick in, according to economists surveyed by Bloomberg News at the end of May. Instead, compromises will limit the damage to 0.8 point, sustaining the expansion, the survey showed.
In a 2003 speech that shaped monetary-policy strategy, Greenspan told central bankers in Jackson Hole, Wyoming, that “uncertainty” was the “defining characteristic” of the policy landscape, making risk management a core element of central banking.

Provide Insurance

“Policy makers need to consider not only the most likely future path for the economy but also the distribution of possible outcomes about that path,” he said. Officials “operating under a risk-management paradigm may be led to undertake actions intended to provide some insurance against the emergence of especially adverse outcomes.”
That paradigm is the opposite of a “keep-your-powder-dry” strategy that waits for confirmation from lagging economic data to indicate the economy is turning one way or another, said Joe Gagnon, senior fellow at the Peterson Institute for International Economics in Washington.
He predicts the Fed will extend Operation Twist for another three months. Because risk-management considerations come into play, he said he won’t rule out another round of bond purchases that includes mortgage-backed securities.
“Risk management means your forecast is the most likely outcome, but you shouldn’t just set your policy on that,” said Gagnon, who worked under Greenspan and Bernanke as associate director in the Fed’s Division of International Finance. “If the risk now is a lower outcome on employment or growth, then they need to take that into account by being more stimulative than they otherwise would have been.”

To contact the reporter on this story: Craig Torres in Washington at [You must be registered and logged in to see this link.]
To contact the editor responsible for this story: Chris Wellisz at [You must be registered and logged in to see this link.]