Collinson FX Market Commentary- 11 April - Euro equity markets crash
by Collinson FX on 11 Apr 2012
Collinson FX market Commentary: 11 April 2012
Auckland City © Richard Gladwell www.richardgladwell.com
Equity markets continued to tumble after the fallout from the bad Non-Farm Payrolls last 'Good Friday'. European equity markets crashed after further Bond scares shook stability and questioned the state of the EU.
Confidence in the ECB's ability to solve the EU debt crises has taken a hit. After the LTRO pumped in record amounts of cash into the banks to alleviate short term pressures and they in turn supported sovereign debt. The problem with the bonds not only remains but has degenerated. EU nations have continued to increase their debt to GDP and this will continue until the can balance their budgets to halt the borrowing. The problem is that debt is coming to a tipping point in terms of servicing and that is why markets are selling and bond rates are now reaching year long highs again.
The risk aversion spread to currency markets with flight to USD and JPY. The EUR dropped to 1.3080 and the GBP to 1.5850. Volitility hit commodities hard and the associated currencies with the AUD slipping back to 1.0260 and the KIWI 0.8140. In the US the economic recovery will be impacted as Europe slips into a double dip recession and spreads fear with possible sovereign default. Small business confidence in the US dropped with the spring recovery now under pressure. Developments from Europe will give makets direction with economic data being watched closely to gauge the environment.
Collinson FX market Commentary: 10 April 2012
The long Easter weekend ensured a quiet close to the week on the Markets.
The big news for the week was the reluctance of the Fed to participate in further QE which set equity markets back. The Non-Farm Payrolls missed targets by some way Friday coming in at 120,000, well shy of the expeactations of 205,000. Equity markets in the US were closed so the impact will not be felt until markets open again this week. The EUR ended weak around 1.3090 and commodity currencies posted some slight gains.
The AUD rose above 1.0300 and the KIWI had a look at 0.8200. Economic news this week will drive markets with inflation numbers drawing attention and industrial production in Europe and China. The correction to the downside may have further distance to travel unless the mood of markets improves.
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