Greece remains a secondary concern for market participants

Fundamental View

Yesterday saw the broad live pricing in of Eurozone Quantitative Easing into the markets; The Bund made consistent highs throughout the session and the Euro weakened further, bottoming out at a 12 year low. Stocks ground higher throughout the session, muted in the S&P 500 as US rate hike expectations held the bourse back. Overnight saw China release CPI and PPI, with PPI below expectations and CPI up due to Chinese New Year expenditure: the PPI reported was notably low at -4.8%, the lowest since October 2009. We were also privy to the Eurogroup meeting, noted throughout the day as a non-event. This resulted in an unenthusiastic Djisselbloem commenting that Greece has said little since the last meeting and has acted upon less. These comments were largely regarded as priced in as products reacted little in the wake of these but Greece remains a secondary concern for market participants.

Today’s View

This morning we saw Industrial production from France and Italy, with France beating expectations and Italy missing their headline reading. This mixed result garnered no real change in direction as the QE release and dollar strength play continued to weigh on the pair. Stocks remain on the backfoot this morning in the wake of both interest rate hikes and the flat CPI and PPI readings from China. Ahead this afternoon we have US Chainstore sales for the week, Redbook and JOLTS Job Openings. Jolts being the more important of the set, this is expected at 5039; as we saw a big build in payrolls, market participants will be on the lookout for any positive reinforcement of the Interest Rate Hike argument and thus beats on this particular figure could lead to a push higher here. Overall with stocks continuing to move lower, we expect that the inverse correlation with haven government bonds will be maintained. With the bund elevated by QE demand and the news that negative yielding bonds will also be on the purchase order for the ECB, we have seen this correlation hold across European and US markets.