Sunday, June 19, 2011

Crisis Averted?

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By Mike Conlon | June 17, 2011

Breaking news this morning is the announcement that there has been a major “breakthrough” in the Greek debt crisis. Germany has apparently agreed to another rescue package and it is rumored that the IMF forced their hand in the matter.

This is seemingly good news for the Euro today, as it is continuing yesterday’s gains. However, I am not comfortable saying that we are out the woods just yet, and I still believe this poses a major risk in the marketplace. Yet so far this morning, markets are in risk-taking mode, though we will see if this lasts heading into the weekend.

There is very little news out today in the way of economic data, so the markets are focus solely on this crisis. The US leading indicators are due out later this morning and are expected to show a gain of .3%. This sometimes can be a predictor of future growth so they market may pay special attention to it with little else to focus on, other than the UM consumer confidence survey.

It is possible that news may trickle out throughout the day, so be aware of anything that could cause erratic market behavior. Not to mention that today is “quadruple witching” where the expiration of multiple products occurs.

US stock futures are trading higher, yet oil and gold are lower which could be part of a correlation shift that may play out over the summer.

In the forex market:

Aussie (AUD): The Aussie is mostly higher on risk appetite this morning as the market likes what it is hearing from the Euro zone regarding the Greek debt crisis.

Kiwi (NZD): The Kiwi is moving similarly to the Aussie after having been sold off earlier in the week due to the risk themes in the market.

Loonie (CAD): The Loonie is also somewhat higher, though wholesale sales are expected to come in lower than last month. Lower oil prices are muting Loonie gains this morning as oil is trading back to a 93 handle. (Click chart to enlarge)


Euro (EUR): The Euro is trading higher despite worsening trade balance figures because of the apparent news out of the Euro zone. However, I must tell you that this is not a solution to the problem, but merely another band-aid to buy some more time. EU leaders have to come up with a credible plan otherwise this situation is going to continue to hang over the global economy. (Click chart to enlarge)


Pound (GBP): The Pound is mixed today as this week’s data has showed that the UK economy is slowing.

Dollar (USD):  The Dollar is mostly lower on risk taking ahead of this morning’s leading indicators and consumer confidence reports.

Swissie (CHF): The franc is weaker across the board as safe havens are down today as investors seek yield.

Yen (JPY): The Yen is showing some strength today despite the risk appetite in the market after the Asian stocks were lower overnight.

I don’t want to be a buzz kill here but this Greek and more importantly Euro debt crisis is far from over. While today’s announcement of a “breakthrough” by France’s Sarkozy has the markets feeling a sense of relief, the devil is in the details as they say.

This has all of the trappings of just another short-term fix to a long-term, structural problem. If Euro leaders think that they can now go on holiday because they threw some money at the problem, they will have done the global economy a disservice.

I still believe there is major risk in the market and a proper, long-term solution is the only medicine that can cure what ails them. However what that entails is anyone’s guess at this point, as people far smarter than me struggle to find an answer.

So I’m going to flatten my positions at the end of the day, as the risk manager in me tells me that this may not be a done deal just yet!

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