Greek stock market falls 4.5%

The Day So Far

Chinese authorities announced their latest measures to prop up battered stock markets, banning short sellers from opening and closing short positions within a single day. There is also a ‘national team’ of state-owned banks who are flush with cash and charged with buying stocks and mutual funds to support the markets if investor sentiment turns sour. These measures, although welcomed in the short-term, with the Shanghai Composite up 3.5% on the day from a negative start, surely have a longer-term negative impact on the effectiveness of the market and the level of faith in these centrally-managed indices. Shorts play a essential role in providing balance against the natural bullishness of investors and punishing high valuations. In the absence of short sellers bubbles can occur and then collapse suddenly when ‘the herd’ collectively change their mind and stampede for the exit.

Elsewhere, the Greek stock market continued to lurch lower following yesterday’s long-awaited re-opening, 4.5% down today to go with Monday’s sell-off. Equities have traded in tight ranges today, the Bund briefly breaching the 155 handle before re-tracing.

There was some respite for commodities this morning, crude rebounding to the $46 handle from yesterday’s lows just above the $45 level. The Aussie dollar enjoyed its 8th best day since 2008, following the commodity rebound and the RBA’s decision to leave rates on hold and removing some of the move dovish language from the previous statement.

The Afternoon View

On the light side data-wise today, with just the New York ISM at 14:45 BST and Factory Orders at 15:00. as such, we have fairly modest profit targets for today, sticking with our short bias for equities, crude and the euro but with a long in t notes as we look for more bullishness after Friday’s very weak US Employment Cost Index, coming in at a 30 year low and likely pushing back the Fed rate hike timing until later than September at the very least.