The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
While euphoria was nowhere to be seen in Asia yesterday, it was quite evident in the US markets amid the Greece debt talks.
US equities were buoyant, with Nasdaq closing at record highs. It seems the US markets were confident that the Federal Reserve was not going to move aggressively on rate normalisation.
Good jobs data may also have helped sentiments, as the initial jobless claims reached a low of 267,000, which may portend another good non-farm payrolls reading for June.
European markets were also quite positive despite the Eurogroup meeting not yielding any resolution, which was expected. The noose on Greece is tightening at a rapid rate. It was reported that another EUR 2 billion was withdrawn out of Greek banks over the past three days.
There will be an emergency conference call today between the European Central Bank and Greece to discuss about extending emergency liquidity to Greek banks.
Looking ahead to Asia
In Asia, the Bank of Japan (BOJ) will be holding its policy meeting today. Consensus is not expecting any changes from the BOJ, especially after Governor Kuroda recently said that the real exchange rate for Japanese yen has weakened too much. By implication, this means more QQE may not be warranted at this point.
China markets will see a flurry of IPO activity today, as 25 new listings are expected to take place. It was estimated that a record of CNY 6.7 trillion (USD 1.1 trillion) worth of funds is being locked up for subscription to these IPOs. Furthermore, the China Securities Regulatory Commission (CSRC) was reported to be working on margin trading risk management rules for securities companies, according to 21st Century Business Herald.
This could presage further tightening on margin financing to rein in excessive speculation, as well as reduce the risk of a stock market collapse. Meanwhile, there is still silence on what the next move will be for the People’s Bank of China (PBOC). Expectations remain on one more cut for reserve requirement ratio but the decline in new home prices is slowing, which could reduce the need for more monetary stimulus.
Despite the positive overnight leads, it is difficult to say how Asian markets will perform today. Ongoing Greece drama may continue to weigh on sentiments. Eyes will be on Chinese equities as they may head for their worst weekly decline since early 2009.