The “good times” for risk sentiment continued in today’s session as European stocks, US stock futures, and higher yielding European and commodity currencies rallied against the USD and JPY.
The positive mood is helping to boost the S&P to 5-month highs, and the EUR/USD made a push above the 1.29 area in NY morning trading. Here are some of the stories continuing to push up the recent “hope” and “risk-on” mode in markets.
Will this recent run extend through the NY trading session?
1. Positive Auctions from France and Spain
In Europe, the key has been a calming in the Euro-zone periphery sovereign debt complex. Today we saw more bond auctions go well – this time for Spain and France.
From Financial Times: “Madrid raised more than it had targeted for the second auction in a row as hopes rise that pressures on Spain’s borrowing costs are beginning to ease.
In a closely watched sale of benchmark 10 year bonds as well as debt maturing in 2016 and 2019, the Spanish treasury managed to sell €6.6bn, well above the target range of €3.5bn to €4.5bn and at generally lower borrowing costs.
France also shrugged off losing its top triple-A credit rating at the end of last week and sold €8n of medium-term bonds at lower yields than previously.”
2. Optimism Over Greek Restructuring Negotiations?
The confidence in the European theater still hinges on the debt restructuring negotiations underway in Greece. The market may be pricing in a generally positive resolution, which may be premature, though the idea of Greece paying its full €14.4 billion euro redemption on March 20th seems less and less likely.
From Financial Times – Athens closes in on bondholder pact:
“The latest proposal called for a coupon starting at about 3 per cent and rising to 4.5 per cent as the bond approached maturity, one banker said. Another said the average interest paid during the life of the bond would be 4.25 per cent, which he described as a rate “that the banks would be happy with”.
The deal would amount to a 68 per cent loss for bondholders in net present value terms, according to people familiar with the talks.”
3. Focus Moves From Weaker Citi Earnings to Better Goldman, Morgan Stanley, BofA
In further earnings news from the US, a poor performance by Citigroup earlier in the week has now been followed by better than expected results from Goldman Sachs yesterday, and by Morgan Stanley and Bank of America today. That helped boost US futures, which further fueled more “risk-on” trades in currency markets.
From Marketwatch: U.S. futures gain; B. of A., Morgan Stanley up
“Bank of America shares rose more than 5% in preopen trading. The bank swung to fourth-quarter net income of $1.58 billion from a loss of $1.57 billion in the year-ago period as revenue rose 11%.
Shares of Morgan Stanley rose nearly 4% in pre-market trading. The bank swung to a fourth-quarter loss of $227 million, or 15 cents a share, as revenue fell 26%. Analysts had expected a loss of 57 cents for the bank.”
4. China Ready to Ease Capital Requirements
On Monday, the market saw data from China and seeing growth faltering to the lowest level in 10 quarters began pricing in looser monetary policy from the People’s Bank of China. Today we got some movement in that direction as Chinese bank regulators said they would in fact ease some capital requirements.
From Bloomberg: China Said to Consider Relaxing Capital Rules for Banks as Economy Falters
“China’s banking regulator is weighing a plan to relax capital requirements for lenders after the world’s second-largest economy expanded at the slowest pace in 10 quarters, four people with knowledge of the matter said.
The China Banking Regulatory Commission is delaying implementing the most stringent capital adequacy ratios and may lower risk weightings for loans to small businessmen and companies, the people said, declining to be identified as the matter is confidential. The watchdog may also allow banks to increase the excess bad-loan reserves used in calculating risk buffers, they said.”
- Nick Nasad is the Chief Market Analyst at FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.
