Big markets out, BUT Greece is in the crosshairs

Quick Recap

Just because the US, UK, Germany and Hong Kong were out doesn’t mean nothing happened overnight.

Well, markets didn’t move that much but the Greek situation feels like it is deteriorating again. Here’s what I wrote at Business Insider this morning:

Grexit is now looming as a clear and present danger to the Euro and maybe even global markets. Sure, it makes up hardly any of the EU’s total economic output and is even less important to overall global growth and markets but the unknown consequences of a grexit on markets, both related and unerelated, could be destabilising. Overnight we heard from Greek Financial Minster Yanis Varoufakis who wrote an article entitled “Austerity Is the Only Deal-Breaker”. He wrote that Greek is keen to work with its creditors on positive reforms but said:

“The problem is simple: Greece’s creditors insist on even greater austerity for this year and beyond – an approach that would impede recovery, obstruct growth, worsen the debt-deflationary cycle, and, in the end, erode Greeks’ willingness and ability to see through the reform agenda that the country so desperately needs. Our government cannot – and will not – accept a cure that has proven itself over five long years to be worse than the disease.”

So as BI UK’s Mike Bird wrote last night the new Greek government’s honeymoon is over — and default is just around the corner.

So watch that space.

One huge thing that happened yesterday, besides the ridiculous continutaion of the Shanghai stock market rally was that the Chinese announced a massive stimulus program of more than 1,000 projects. They are seeking Public Private Partnerships to get things moving.  As I wrote yesterday afternoon I think Shanghai is getting close to a top at 5,000 and would be stepping off that train around current levels whic, with yesterday’s close at 4,813, are only 187 points below this level.

But as my colleague David Scutt over at Business Insider points out even though China’s stock market surge screams danger, fighting policymakers can be equally dangerous. Traders would be mad to go short until a top is clearly in place but parabolic markets throughout history eventually end.

On the day

On the data front today, Kiwi trade is out along with Singaporean Q1 GDP but the big one tonight is durable goods in the US. There’s also the Case Shiller home price index, Markit services PMI, new home sales and Richmond Fed survey tonight.

Here’s the overnight scoreboard(8.35am AEST):

• Dow Jones Closed
• Nasdaq Closed
• S&P 500 Closed
• London (FTSE 100) Closed
• Frankfurt (DAX) Closed
• Paris (CAC) down 0.5% to 5,117
• Tokyo (Nikkei) up 0.74% to 20,413
• Shanghai (composite) +3.35% to 4,813 – AMAZING
• Hong Kong (Hang Seng) Closed
• ASX Futures Overnight (SPI June) -4 to 5,722
• US 10 Year Bond Closed
• Australian 10 year bond 2.91%
• AUDUSD: 0.7824
• EURUSD: 1.0975
• USDJPY: 121.57
• GBPUSD: 1.5470
• USDCAD: 1.2312
• Crude: $59.80
• Gold: $1,206
• Dalian Iron Ore (September): 435.5 (up 14)

CHART OF THE DAY:  Euro Yen

Euro Yen is just slipping below the big uptrend line from this year’s low.

That’s because while the Yen has been essentially becalmed the Euro has had a massive pullback. The question now is whether the Euro continues to fall (its the driver of this cross at the moment).

My sense is it will and I’ll be selling EURJPY on a break of my slow moving average at 133.13.

I continue to hold the view I articulated on Euro yesterday. That is, “Break run to next level and break. The low so far has been the 50% retracement but a run toward the next Fibo support at 1.0832 over the course of the week.”