Some broad macro commentary from Bloomberg's Richard Breslow
This morning doesn’t have the feel of full blown risk aversion, but there is a queasiness out there that is causing markets to feel every spin and lurch uncomfortably. The metaphor would, of course, be more apt if this unease was causing the screens to look green rather than decidedly red, but there you have it.
It’s not only Greece this morning. Things just don’t seem to be functioning smoothly anywhere. More arrests in Hong Kong, delays to the Shenzhen-Hong Kong Exchange link, Kuroda having to say he didn’t mean what he said, weaker start to the new month’s numbers in the U.S., an Indian export number that put paid to any hopes of a reversal of what has been an inexorable six-month collapse, disappointing European car sales (slowest in 6 months) with noted weakness in Latin America being cited, peripheral bond spreads widening out, Spanish 10-yr hitting highest yield in 10 months. Well you get the idea.
But base case remains from a clear plurality of analysts that Greece will be saved (can kicked), China growth expectations are rising, monsoons will pour rain and the FOMC will thread the needle and be both optimistic and placatory. And this is actually a sign of healing. The market is trying to see the bright side of life. Of course if this optimism expectation is based solely on the belief that central banks will “provide” it may require a measure of temperance
The BOJ’s Kuroda held a press conference today and tried to walk back the dog of his JPY comments that sent USD/JPY down 3 big figures. Today’s “retraction” was worth a fleeting 50 pips. People have the short JPY position and it turned into a thank you very much moment. And markets are growing tired of serial official comments being retracted, refined and modified. Perhaps global bankers are simply making too many speeches. Fed and EU speakers, please take note
RBA minutes came and went with little affect. Broke no new ground and won’t do until new 2016 forecasts are prepared. Back to data dependency. AUD fell modestly several hours later in sympathy with the general risk slump, not from the RBA
Volatility in equities is going to continue and coming from still very lofty levels. Keep an eye on the Shenzhen-Hong Kong link issue. It was a big reason for the explosion of market values and we may get a rise, profit-take, rinse repeat
But the profit taking could be short-term roiling. The political news in Hong Kong is also important, especially if the mainland wants to teach HK a lesson in politics. At the end of the day, the PBOC, and most central banks, believe in the equity market wealth effect and will err on preserving it.
Bottom line is the markets feeling a bit nauseous today but are not ready to vomit and people are still looking for opportunities to prudently add