Intraday Market Thoughts

Moody's Eyes Spanish Banks, Stocks Reach 7% Point

by Patrik Urban
May 17, 2012 12:47

EURUSD hits 1.2667 and equity futures deteriorate further as Moodys warned it will downgrade 21 Spanish banks, Syriza party says will never join pro-bailout coalition and more chatter of Greek bank run. S&P500 eyes 1320 territory, marking the 7% peak-to-trough decline at which buying the dips pevailed frequently throught 2011. This level now becomes the key point, separating dip-buyers and momentum chasers. US markets turn to jobless claims, Philly FED and leading indicators. EURUSD hits first of our targets at 1.2670 with 1.2650 awaiting for 2nd sort. Both Premium gold & AUDUSD shorts hit all targets, while USDCAD long was stopped out. More detail on the 6 Premium charts and other ideas is found below.

USD pushes higher across the board but the volatility has been slightly smaller as German, French and Swiss banks are closed today in observance of Ascension Day. European equities are losing about 1% and the relative strength winner is JPY while GBP lags.

Greek uncertainty continues to punish the common currency as the current state of paralysis will continue at least until new elections on June 17th. In a new development, the ECB no longer offers liquidity to some Greek banks which it considers insolvent. According to Reuters, bank run continues as Greeks withdrew hundreds of millions of EUR recently due to growing fears that the country might be forced out of the Eurozone. According to some estimates, disorderly exit could come with a price tag of as much as USD 1 trillion. German bund yields hit new low

Spain reached the upper limit of its EUR 1.5 to 2.5 bln target range as it sold various bonds totaling EUR 2.49 bln. All average yields rose but cover improved. The auction came only a few hours after Q1 GDP was confirmed at -0.3% q/q and -0.4% y/y. Spanish 10 year yield rose to 6.35% earlier during the session and now trades around 6.32%.

The US session will bring jobless claims at 8:30 am ET that are seen only a little changed compared to last week at 368K from 367K followed by Philly FED index at 10:00 am that is expected to rise in May to 10 from April's 8.5. April leading indicators are anticipated to rise only 0.1% from previous 0.3%.

Canadian data includes international securities purchases that are seen lower at CAD 8 bln in March from previous CAD 12.5 bln and wholesale sales which should rise 0.3% from previous 1.6%.

The market could also react to a pre G8 meeting video conference among key European leaders that is according to Italian government sources scheduled to start around 3:30 GMT.

Tuesdays Intermarket Insights 6 charts are on EURUSD Option Volatility, EUR Volat vs EUR cash, S&P500, Dax Weekly, Gold Monthly vs. Weekly. Shorts in US crude are in progress. Subscribers can click here for direct access: Nonsubscribers can click here:


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