Intraday Market Thoughts Archives
Displaying results for week of May 27, 20187 Reasons Not to Panic over Italy
As Italy presents a new government on Friday,the stream of Euroscepticism inside the coalition govt cannot be denied, and the rise of non-performing bank loans is plaguing Italian financial markets. But here's why the reality won't live up to the fear. Full analysis.
قفزة الكندي (٩٠ نقطة في ٢٠ ثانية) اثناء تسجيل الفيديو
شاهدوا قفزة الكندي (٩٠ نقطة في ٢٠ ثانية) اثناء تسجيل الفيديو خلال قرارالمركزي الكندي وماذا يعني ذلك لصفقاتنا الحالية (الفيديو الكامل)
Contagion Has Limits
Contagion usually has limits, especially considering the unavoidbale truth that Italy cannot be allowed to exit the Eurozone. Italian bond suffered their worst day since the peak of the Eurozone crisis as 10-year yields soared nearly 50 basis points leading to a global bout of risk aversion. The yen was the top performer while the euro lagged. Month-to-date, silver is the strongest, followed by the franc & the yen. Euro is the weakest, just ahead of the pound. A new JPY trade has been issued to subscribers, explained in detailed in the member's video below.
It was a harrowing day in the Italian debt market with 10-year yields rising 48 basis points to 3.16%. It's the continuation of a one-way move that started in the second week of May at 1.80% in response to political turmoil.
A new election is now the likely scenario and may come as soon as July 29. Efforts to form a caretaker government have stumbled in part because some politicians and technocrats may be loath to participate. What's more important at the moment is that the worries have spread. Italy is the fourth-largest debt market in the world and the turmoil created a massive bid in US Treasuries, sending yields down 12-16 bps across the curve. In turn, the yen and Swiss franc soared. Indices fell hard, with the DOW30 dropping over 400 pts. 2 weeks ago our Premium short in the DOW30 Premium was stopped out at 25,050, before the index crawled up 36 pts and later fell 700 pts.
What's next? The contagion has a limit. There is clearly some forced selling in Italian debt at the moment. Once (if it) it ends, debt elsewhere will stabilize and reverse the yen moves. The Swiss franc may maintain a stronger bid due to its proximity to Italy. Ultimately, the trouble in Italy will be contained – this isn't going to derail the global economy -- but the question remains: when does it stabilize? We will be watching closely for a formal announcement of new elections and how the market reacts.
In the meantime, technicals are cautionary. EUR/JPY is at the lowest in 11-months and global equities took a hard hit. A strong rebound in some assets may be near but the euro may be slow to turn.
In the short-term, domestic economic data is likely to be overshadowed by global sentiment. Japanese retail sales and Australian building approvals are on the calendar in Asia. The Bank of Canada decision is later with the latest turmoil solidifying at least another six weeks of wait-and-see.
| Act | Exp | Prev | GMT |
|---|---|---|---|
| Retail Sales (y/y) | |||
| 0.9% | 1.0% | May 29 23:50 | |
| Building Approvals (m/m) | |||
| -2.9% | 2.6% | May 30 1:30 | |
ندوة مساء اليوم
ندوة منحنى العائد الإلكترونية ما هو وكيف يستعمل في تقييم إحتمالات تخفيض الفائدة؟ رابط التسجيل رابط التسجيل فقط من السعودية
Selling in May the Italian Way
Global markets selloff across the board as Italy's political uncertainty deepens and raises new questions about the economic integration of the euro project. Italian 2-year yields hit a 6-year highs as bond prices tumbled, EURUSD broke below $1.16 to a fresh 10 month lows, while the yen soared against all currencies, dragging USD to 108.40. Initially, markets cheered when Italy's President rejected euroskeptic Savona for the post of finance minister, but the move raises as many questions as it answers. After climbing to 1.1730 the euro sank to a fresh six-month low of 1.1604, stopping out the Premium EURUSD trade. A new JPY trade will be issued shortly.
The market selloffs were amplified by thinned activity during the holidays in the US and UK but the concerns remain clear. Former IMF economist Carlo Cottarelli has been asked by Italy's president to form a caretaker government, but the 5-Star/League coalition believes they should be allowed to rule. Five-Star Leader Di Maio has called for protests on June 2 and new elections as soon as possible. Both parties will frame a new vote as upstarts versus the establishment and that may play into their favor.
At best, the outcome is uncertain and the threat of protests and unrests encourages a further bid for safety. Markets tend to bottom when the light at the end of the tunnel is in sight but the months ahead in Italy are opaque.
Another move in thin trading Monday was a rise in USD/CAD above 1.3000 for the first time in two months. Oil prices were down another 2% and that was the main driver but the market is also increasingly convinced that the BOC won't hike on Wednesday.
