Morning Briefing

Morning Briefing for Monday, 13 Feb 2012 (Updated 09:22:28 CET)Approval of Greek Austerity Package Initially Takes Markets Higher

What’s new:

Asia: Positive session on Greece approval of austerity measures. Yen weaker on risk taking and weak growth figures.
Europe: Markets on a positive note on back of Greece.
US: Disappointing consumer confidence took markets lower forcing S&P into its first decline of 2012.

Rates in Asia and Indices:

EURUSD: 1.3276– 1.3207.
USDCHF: 0.9161 – 0.9109.
GBPUSD: 1.5804 - 1.5759.
EURJPY: 103.03 – 102.65.
USDJPY: 77.78 – 77.57.
DowJones: 12’801.23 -0.69%
NASDAQ: 2'903.88 -0.8%
S & P 500: 1'342.64 -0.69%
Nikkei: 8’999.18  +0.58%
Shanghai: 2'351.85 -0.01%
Gold: $ 1'731.80
Crude Oil: $ 99.54
 

Comments:

After a weak close last week, where S&P posted its first negative week in 2012, markets in Asia enjoyed a fairly good session on the news that the Greek deal had been passed through by the parliament on Sunday. Japanese real GDP shrank 2.3% in Q4 which was much worse than expectations at 1.3%, primarily caused by lacking exports as the Yen remains very strong.
 
In Greece, the €120 billion austerity package was approved by 199 to 74 votes, which is a relatively strong result for Lucas Papademos, opening the door for Greece to receive a second package from the EU and IMF aiding the Greek economy in restructuring their massive sovereign debt. The approval of the package is crucial for Greece as the country otherwise most probably would enter the state of default due to larger refinancing operations in mid-march. Fitch is still addressing the risk for Greece missing the payment in March to be relatively high.
 
The Greek policy-makers have committed to cutting jobs in the public sector by 150,000 in the next three years, lowering of the minimum wage to €560 a month and a €300 million reduction pensions. The next formal step is a written commitment from the two major parties in the Greek parliament to implement the programme regardless of the outcome of the national election, expected to take place in April.
 
The news from Greece was generally received as possible despite some voices still concerned on the outcome and if Greece will be able to fulfil their obligations. The German finance minister, Wolfgang Schäuble, said in an interview to Welt am Sonntag, that “Greece’s promises are no longer enough for us. They must first implement part of the old programme.”

The economic calendar is lacking interesting data points, but markets will focus on outcomes from refinancing operations from France, Germany and Italy. Italy is auctioning away €8.5 and €3.5 billion in 12-months papers. If the outcomes are positive and demand is met, the market could continue on the positive note. Looking into the next couple of days, the markets will tune in on the sentiment figures from the German ZEW and US Retail Sales tomorrow as well as the preliminary euro-zone Q4 GDP and US Industrial Production on Wednesday.
 
EUR/USD increased overnight and has current resistance at last week’s high at 1.3321. A break above could trigger a test of next close resistance at the 100-day moving average, currently at 1.3338. Support at 1.3156 (Friday lows)coinciding with the 76.4% Fibonacci retracement level in the wave from 1.2625-1.3321. If this level is taken out, next support is at 1.3055.
 

Have a nice day,