The spotlight remains on Italy today as the Italian Prime Minister faces several challenges in parliament. The leaders of the opposition will decide whether to present a no-confidence vote to be attached to the 2010 budget vote. Although it is not clear whether a vote on Silvio Berlusconi’s leadership will indeed take place, uncertainty remains high and investors need to be braced for yet more potentially confusing headlines. Continue reading →

Investors will probably need to brace for a second day of uncertainty as the political situation in Greece remains on edge. After a day of denial and counter-denial, George Papandreou remains in power but the opposition is clearly unwilling to enter into any form of negotiation to form a national unity government with him at the helm. Key global leaders gathering in Cannes are watching the situation unfold with unease, but their options are currrently limited to prevent any form of major fallout. Continue reading →

The full G20 summit kicks off in Cannes today with the situation in Greece firmly in the minds of all participants. Before the gathering the Eurozone is to hold yet another summit (though dubbed ‘mini-summit’) amid the search for further clarity with regard to the situation with the referendum. It is clear that the Eurozone leadership is has accepted the vote but are fully framing it in the context of whether Greece wants to remain in the Eurozone; if the answer is in the negative then the Eurozone leadership will look to contain the fallout, and key officials are now openly contemplating the possibility Continue reading →

The focus remains squarely on Greece, leaving risk assets at the mercy of headlines. The Greek press reported that Prime Minister Papandreou refused to back down on his plans at an emergency cabinet meeting Tuesday evening, and still intends to hold a confidence vote in the government Friday. Continue reading →

Investors took no chances overnight as a combination of event risk and growth fears put risk aversion back in the driving seat. The RBA cut rates to 4.50%, but this was of little relief as events in Athens once again put the Eurozone’s ability to resolve current problems in doubt. Greek Prime Minister Papandreou called a confidence motion in the Greek government, due to be held in parliament this week, and a referendum on the proposed second rescue package for Greece in the coming months. Continue reading →

The Japanese Finance Ministry authorized intervention in FX markets for the 3rd time this year, pushing USDJPY back to above 79.25 after the pair had touched a new post-war low of 75.35. The action itself is not surprising, but the timing is as many investors had expected the MoF to act after the FOMC decision this week, as there remains residual risk of fresh balance sheet expansion by the Fed, which would have exerted further downside pressure on USDJPY. Continue reading →

The post-summit risk rally continued throughout the US session, and was stoked further by an article in the Financial Times claiming China is “very likely” to offer financial assistance to Europe. EFSF CEO Regling is in Beijing meeting senior Chinese leaders over potential contributions to the EFSF. Comments hit the wires overnight, Regling said ‘we all know China has a particular need to invest surpluses’ and the EFSF can be a good product for its investments needs. The Vice Finance minister in China, Zhu confirmed that talks are under way. Continue reading →

The euro and risk assets rallied overnight as clear developments emerged from the EU summit. The most important outcome of last night’s marathon summit seems to be reaching an agreement with the IIF that a 50% face value haircut would be accepted ‘voluntarily’. This means in all likelihood that the ISDA will rule that the restructuring does not amount to a credit event and CDS payout is not triggered. Continue reading →

All eyes will be back on the Eurozone today as the leaders of the European Union hold their second summit in the space of a week in search of a comprehensive solution to the Eurozone debt crisis. However, pre-summit nerves are showing as Tuesday’s headline flow was hardly reassuring for those in search of a positive outcome. German lawmakers initially disputed the inclusion of language in the final draft calling for more secondary bond purchases by the ECB. Continue reading →

The past few trading sessions have provided investors enough headlines to anticipate the broad outcomes of this week’s Eurozone summit. There are plans on the table, which are not mutually exclusive, and the debate has shifted back to private sector participation in reducing Greece’s liabilities. It is somewhat reassuring that no official calls for coercive restructuring have yet been made. Continue reading →

Overnight, EURUSD traded in a range of 1.3831-1.3907 and USDJPY in a range of 76.18-76.46, having rebounded from record lows last Friday Ahead today, German and Eurozone activity indicators are out but investors will continue to monitor Eurozone headlines ahead of Wednesday’s summit. Flash China PMI rebounded to 51.1 overnight, a positive result for markets fearful of a hard landing in emerging markets. Continue reading →