Intraday Market Thoughts

Sentiment Rages Again on Greece and Chicago PMI

by Adam Button
Jun 30, 2011 23:22

Equities soared for the fourth consecutive day on Thursday after Greece passed its final austerity vote and the Chicago PMI beat expectations. CAD was the top performer while CHF was the laggard. The upcoming session will be very busy with Japanese employment, CPI, household spending and the Tankan. PREMIUM TRADES hit Today's LONG TARGETS in EURUSD, S&P500 & shorts in USDJPY. Other remain in progress.

The euro posted another strong performance while the dollar was mostly weaker after Greece passed the legislation needed for the next tranche of EU/IMF funds. Unfortunately, there already may be some troublesome signs. Bloomberg reports that Papandreou has asked for a quicker dispersal of the aid which means that spending cuts and/or tax revenue have fallen well short of expectations.

Yesterday's EUR longs from Ashraf's Intermarket Insights found their target as the pair topped out at 1.4538 shortly after the European close. The pair ran into downtrend resistance around 1.4530. Short USD/JPY also reached its initial target as did trades on EUR/JPY and stocks. TO BECOME A SUBSCRIBER:

The Chicago PMI blew away expectations, surging to 61.1 from 56.6. (54.0 exp). This is helping to drive the idea that the recent slowdown was due to Japanese supply disruptions rather than a domestic slowdown. The consensus remains at 51.5 for tomorrows ISM report but the market will now need something 3-4 points higher to keep the positive sentiment going.

Some negative news creeped in but was ignored as the S&P 500 rose 1% to 1320. Initial jobless claims remained elevated at 428K compared to the 420K expected. Bank of America also agreed to pay $8.5 billion in settlement due to misrepresentations in mortgage securities. It will take at least rest of the year for BAC to rebuild that capital and that leaves it vulnerable to shocks.

Bloomberg reports that Treasury Secretary Geither will consider leaving his post after a budget deal. He took over when Obama assumed office so he would be leaving after less than three years on the job. He lacked charm and charisma from the beginning and is unpopular on Wall street and Main street.

Asia-Pacific Preview

A quiet week in Japan picks up considerably on Friday. At 2330 GMT the unemployment rate is expected to tick higher to 4.8% from 4.7%. At the same time, core CPI is expected at 0.5% y/y and household spending expected to fall 1.7%. At 2350, the Q2 Tankan large manufacturers index is expected to fall to -7 from +6.

All these releases will be market moving but the most important will be the Tankan because it relates to a badly quake-damaged industry and it is forward looking. Expect to see some USD/JPY weakness on a strong reading (better than -2).


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