ZuluTrade Blog

Asian shares trade in positive territory led by Chinese ones on speculation the government will take more steps to halt the slowing economy

Market View | Tuesday, May 29, 2012 4:35 AM GMT

Good morning ,


-Yesterday, US markets were closed in observance of Memorial Day Holiday. In

Europe, most Equity markets ended slightly lower. This morning, Asian shares

trade in positive territory led by Chinese ones on speculation the government

will take more steps to halt the slowing economy.


-At the start of the new trading

week, sentiment on risk wasn’t that bad. Investors drew some comfort as

opinion polls in Greece indicated that the conservative ND parity is (re)gaining

support. The news triggered some kind of a relief rally of EUR/USD as shorts

were reduced after last week’s steep losses. EUR/USD reached a correction high

in the 1.2625 area early in European trading. However, the move lacked power

and ran soon into resistance.


-According to sources, the Spanish government may bolster troubled lender

Bankia with sovereign bonds in return for shares in the bank and could use this

method to prop up other troubled lenders. The risk premium on Spanish

government debt hit a euro-area high.

-Greece’s bank support fund disbursed €18 billion to the country’s four biggest

banks as a part of a long-planned recapitalisation effort, a fund official said

yesterday, allowing lenders to regain access to ECB funding.

-Bank of England policymaker Ben Broadbent rejected yesterday a call from the

IMF to consider cutting interest rates further, saying it would not help

businesses much and could discourage bank lending. Broadbent added that the

current shape of monetary policy was appropriate.

-Switzerland is drawing up plans for emergency measures including capital

controls in case the euro collapses, central bank President Jordan said, although

he added that they do not expect to need them.

-The ECB will as usually publish its weekly balance sheet today. Normally, that

doesn’t draw too much attention, but some money from the LTRO operations is

being repaid early, probably due to banks running out of collateral, as some of

the collateral used (Greece linked) has lost its eligibility at the ECB.

-Today, the calendar is moderately interesting. In Europe, the German May CPI

data will be published. Inflation is not the main focus of markets today.

However, a soft figure might make things easier for the ECB to make its U-turn

on more policy stimulation. In the US, the consumer confidence and the CS

house prices will be published. For the consumer confidence released we see

the risks to the downside of consensus. In the current environment, the euro is

again a very sensitive barometer for risk

-Technicals. Early May, the EUR/USD pair finally dropped below the key 1.2974

level (mid February low + bottom consolidation range). This break opened the

way for a test of the 1.2624 year low ands this level was broken last week. The

pair is again in oversold territory, but of late this was seldom a good reason to

expect a meaningful counter-trend. The June 2010 low (1.1877) is the next

high profile level on the technical charts.

Have a  nice day !

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