Intraday Market Thoughts

Greek Taxes Boost Optimism

by Adam Button
Sep 28, 2011 0:44

Greece passed new taxation measures, clearing the way for the upcoming tranche of aid and boosting risk appetite. The best performers were AUD and NZD while JPY lagged followed by USD. The lone data point in the upcoming session is HIA new home sales for Australia.

The vote in Athens was 155 to 142 in favour of a special property tax levy that will generate 1.1% of GDP in taxes and help meet Troika deficit demands. Fin Min Venizelos said on Monday he expects the approval of the next loan tranche in time. Venizelos The solid margin of passage in this bill suggests other upcoming taxation votes will also be successful despite opinion polls showing they are deeply unpopular.

EUR/USD hit a session high of 1.3666 shortly after the Duma passed the bill but gains quickly faded on a report in the FT suggesting as many as 7 of the 17-member eurozone countries are asking for a larger haircut in a Greek restructuring. The S&P 500 gained 1.1% to 1175 but halved its gains in the final hour of trading.

Were surprised at the effect the FT story had on markets because several similar reports began appearing last week, some said Germany is demanding a 50% haircut (up from the 21% thats rumoured to be on the table). Theres no new information here. The reaction shows how jumpy and headline-driven traders are in the current environment. Even though the pullback appears nonsensical, jittery markets usually gravitate to risk aversion.

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The calendar is essentially bare in the region with the exception of August HIA new home sales for Australia. In July sales fell 8% m/m and further declines could trigger fears about a deeper housing correction. In all likelihood, however, this release will go largely unnoticed as the market continues to dwell on Greece and the Japanese governments response to the strong JPY and deflation.


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