Wednesday, 18 February 2015

Some stories today - Greece, CHFs, Fed-speak, new highs & Japan

In summary today, worrying stories but excitable markets! 

Greece – hardball time: as a Reuters report put it ‘unless Athens agrees an extended aid programme soon, keeping ELA capped would put lenders in a funding squeeze that could require the introduction of capital controls to limit savers taking out more of their money’.  Meanwhile the rumour in the Greek media is that ‘Tsipras to call new elections if Eurogroup deal fails’.  Calmer heads need to prevail…still European futures slightly up, euro 1.14 vs US$

Meanwhile, a different time perspective on Greece (perhaps this is the chart some of the German negotiators look at...) 

FX excitements – ‘significant overvaluation of the Swiss currency means that the economy is currently facing strong headwinds and a number of challenges’ or so says the SNB’s Jordan (link here).  

So why did you unpeg it against the euro? (control of destiny/not building up too many foreign FX reserves...)

New highs – despite Greece above and a patchy Ukraine ceasefire, S&P 500 at a record high, as is Jakarta, Australia at a 6.5 year high and Nikkei at highest since July 2007.  VIX did rise 8% yesterday and as for US Treasuries: 10-year yield is already up 50 bps month to date. If month ended today, it would be largest 1-month increase since December 2009.  Confidence really is (worryingly) high…meaning I am looking at the VIX perched just above that interesting '15' handle:

Interesting Fed analysis: ‘An analysis of the minutes of the meeting of Federal Reserve policy makers by Deutsche Bank show that over the last four meetings inflation was mentioned more frequently than employment or unemployment’ (via FastFT)

Asia – Chinese New Year today so many Asian markets closed.  Japan is open and the BOJ confirms Y80trn asset buying a year whilst saying the economy ‘has continued its moderate recovery trend’.  Moderate only with that level of stimulus!

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