Risk Aversion Sentiment Intensified Early Week As A Slew Of Data And Comments Hit The Wire:
(CN) CHINA JUN CONSUMER PRICE INDEX (CPI) M/M: -0.2% V -0.3% PRIOR; Y/Y: 2.2% V 2.3%E (lowest since Jan 2010)
(CN) CHINA JUN PRODUCER PRICE INDEX (PPI) M/M: -0.7% V -0.4% PRIOR; Y/Y: -2.1% V -2.0%E (biggest decline since Nov 2009)
(JP) Japan’s May Trade Balance came in worse than expected at a deficit of ¥848B (versus -¥837B expectation), Machine Orders for the month saw their biggest decline since April 2005 (-14.8% versus -2.4% expectation)
(EU) Credit rating agency Moody’s noted the ECB’s restriction of using government backed bank bonds is a credit negative for some banks in the region. With regards to Italy, spending cuts are credit negative for the regional and local governments. The ECB rate cut was a negative for euro money funds.
(EU) ECB’s Draghi: Reiterates some downside risks to the growth outlook have materialized in his address to EU parliament.
Upcoming News Releases That May Fuel Risk Aversion Sentiment:
How to interpret these headlines?
It seems that risk aversion is the name of the game today as news out of China kick off the week showing that Chinese Economy went to deflationary territory in June, combined with a very disappointing Trade Balance in Japan, it is no surprise that the market showed little consolidation from last week’s sharp sell-offs.
Considering that there are still uncertainties in Europe, as the optimism over the EU Summit wanes, and the fact that credit rating agencies are ready to cut Spain’s sovereign credit ratings, I believe the risk aversion momentum is likely to dominate the market… therefore, we should be looking to BUY USD and JPY, at least during early week. I am looking at either SELL EURUSD or EURJPY as both trades have strong potentials for huge profits.
Risk Aversion Sentiment Dominates Global Markets
July 9, 2012 by Leave a Comment