Greece Austerity Vote Looms & Latest Trades

Markets overlooked soft consumer confidence figures and falling house prices on Tuesday on the belief that Greece will pass austerity measures on Wednesday. The commodity currencies were the top performers and the yen lagged. The upcoming session features Japanese industrial production and the critical Greek vote. Japan Indus Prod beat expectations.

Markets are feeling secure ahead of a round of austerity votes in Greece beginning on Wednesday and continuing through Thursday. The S&P 500 surged 1.3% to 1296 and carry trades won out in the forex market.

The positive sentiment in markets overshadowed some negative news. US consumer confidence fell to 58.5 in June compared to the 60.3 expected and 61.7 prior. The S&P Case-Shiller home price index fell 4.0% y/y, as expected. The Richmond Fed rebounded to +3 from -6; a reading of +2 was expected.

On story that was overlooked was a warning from Siemens about a slowdown in global growth. The German engineering and industrial conglomerate is the largest in Europe and has as good of a grasp on the economy as anyone.

A soft 5-year Treasury auction followed a weak 2yr on Monday. Five year yields jumped 14 bps to 1.59%. 10-year yields climbed to 3.04% after opening the week at 2.87%. The rising yields supported USD/JPY and may be pointing to an intermediate-term turn on bonds.

Greek unions have embarked on a two-day general strike. Police fired tear gas into a crowd and reported that 37 officers were injured and 14 protestors arrested. Nonetheless, expectations are for the measures to pass with around 154 votes. A lower number may fray nerves and at least 151 votes are needed. News services are reporting that the Greek austerity debate will commence around 0600 GMT.

Japans industrial output rose 5.7% m/m in May, the 2nd largest on record due to a recovery of autos and trucks.

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