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Vendredi 11 Mai 2012

China and Greece - May 11, 2012

Market Comment - Chinese weak economic data, Greece, Pasok attempts to form a coalition government and JPMorgan's 2 Billion trading loss.

China and Greece - May 11, 2012
European equities are under pressure in early trading after disappointing economic data out of China, both industrial output and retail sales posted lower than expected readings. Especially worrying are Chinese industrial output figures missing estimates by a wide margin indicating that the economic slowdown in Europe might be having a much bigger impact on China’s economy than originally expected with some seeing chances for a hard landing increasing substantially.

On a positive note Chinese inflation data came in again lower than expected and well below the 4% target, this combined with the weak economic figures seen today should bring forward any planned cuts in interest rates and lowering of the reserve rates, possibly even spurring a growth program implement by the Chinese government.

Additionally news from JPMorgan after yesterday’s US close announcing that they have suffered a trading loss of several Billion USD is filtering through to other banks pressuring the entire sector not only in the US but in Europe too.

On the last day of the trading week main focus will continue to remain on Greece and efforts to form a new coalition government. However even if the goal will be achieved to form a new coalition government and therefore Greece being able to avoid having to call again new election this might not necessarily be enough, instead a clear commitment to agreed austerity measures of all parties involved in the new government will be needed in order to remove most of the uncertainty surrounding Greece and their future in the Euro. Despite uncertainty surrounding Greece at the moment the Italian T-Bill auctions scheduled for mid morning are expected to go alright, with interest rates probably continue to creep upwards.

Markus Huber - Head of German HNW Trading - ETX Capital

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