Equity markets are lower on Tues. after the Bank of Japan financial policy meeting minutes produced a dismal policy statement and markets have begun to forecast a negative reaction to the Italian Treasury auction later this week. Risk assets were lower with high yielding currencies dumping and most commodities pushing lower in the session. Trading volumes remain thin even with the US stock exchanges re-opening, as the UK, HK and Australia are still closed for holidays.
Risks cited by the Bank of Japan were principally predictable, with the European debt crisis and the continuing strength in the Japanese Yen (JPY) regarded as the main points for concern. Other macro releases out of East Asia came with disappointing consumer confidence survey out of South Korea and Chinese business profit data. Later today, the macro focus will center on the US Home Price Index and the market is expecting declines for these figures also. After this, the next big event risk will be seen with this week's Italian bond auction, where 9 billion Euros in 6 month treasury bills will be sold during the Wednesday session.
End of the year totals for the major worldwide stock indices are showing that markets have extended losses, for the most part, as the MSCI East Asia Pacific Index is down 17 % for the year, while the Stoxx Europe is down 12 p.c. These are the worst figures we have seen since 2008 but the one bright spot (if we can call it that) is the S&P 500, which is ready to close the year with a 0.6 % gain.
On the whole, trading volumes remain thin and this is leading to a slowdown in volatility, but there is a chance this could reverse at any point and, if this does occur, the catalyst could very easily be results of the Italian bond auction. Bond yields in Italy rose to nearly 7 percent last week for the 10 year notes. Seven % seems to the "magic number" of sorts as this is the area where Greece, Ireland and Portugal commenced requesting rescue loans, so any increase in this for the Italian treasuries may not be viewed positively by equity markets.
As far as data guesses, the market is expecting the US Home Price Index to show a drop of 3.2 percent for the month of October (on an annual basis) and if this is met, it will be the slowest pace of decline since the start of the year. For the consumer confidence survey, the general feeling is looking out for a rise to 58.6, which will be the highest level since the middle of this year.
Risks cited by the Bank of Japan were principally predictable, with the European debt crisis and the continuing strength in the Japanese Yen (JPY) regarded as the main points for concern. Other macro releases out of East Asia came with disappointing consumer confidence survey out of South Korea and Chinese business profit data. Later today, the macro focus will center on the US Home Price Index and the market is expecting declines for these figures also. After this, the next big event risk will be seen with this week's Italian bond auction, where 9 billion Euros in 6 month treasury bills will be sold during the Wednesday session.
End of the year totals for the major worldwide stock indices are showing that markets have extended losses, for the most part, as the MSCI East Asia Pacific Index is down 17 % for the year, while the Stoxx Europe is down 12 p.c. These are the worst figures we have seen since 2008 but the one bright spot (if we can call it that) is the S&P 500, which is ready to close the year with a 0.6 % gain.
On the whole, trading volumes remain thin and this is leading to a slowdown in volatility, but there is a chance this could reverse at any point and, if this does occur, the catalyst could very easily be results of the Italian bond auction. Bond yields in Italy rose to nearly 7 percent last week for the 10 year notes. Seven % seems to the "magic number" of sorts as this is the area where Greece, Ireland and Portugal commenced requesting rescue loans, so any increase in this for the Italian treasuries may not be viewed positively by equity markets.
As far as data guesses, the market is expecting the US Home Price Index to show a drop of 3.2 percent for the month of October (on an annual basis) and if this is met, it will be the slowest pace of decline since the start of the year. For the consumer confidence survey, the general feeling is looking out for a rise to 58.6, which will be the highest level since the middle of this year.
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