Compass Directions Morning Report – Thursday, 16 February 2012
The negotiations surrounding the refinancing of Greece are now hitting a nationalistic nerve in Athens as continued uncertainty over the timing of the ratification of the nation’s second bailout weighed on investor sentiment. The Greek President Karolos Papoulias made cutting remarks about German Finance Minister Schaeuble as the debacle begins to increase tensions between Greece and other members of the eurozone. The language has become increasingly emotive with Schaeuble’s deputy saying that Greece was a “bottomless pit” while Greece’s President said “I don’t accept insults to my country by Mr Schaeuble. I don’t accept it as a Greek . Who is Mr. Schaeuble to ridicule Greece?” The EUR fell from as high as 1.3192 to 1.3043 despite Luxembourg PM Juncker saying that he was confident that a decision on the bailout would be made at the next euro-area finance ministers summit on February 20.
Andrew Su, CEO of Compass Global Markets had warned in a Bloomberg Television interview that the economic crisis and a rising wave of nationalism amongst Greek politicians is threatening to throw the country into political and social chaos. Investor concerns that Greece is moving closer to default dominated the news wires yesterday. The release of the latest minutes of the Federal Reserve showed debate amongst members in terms of more easing. Some members believe that the Fed must consider more security purchases soon while other stated that the economic outlook would have to worsen be-fore they considered this. The lack of a united view further added to the risk averse tone in the markets last night. The Australian dollar rose to as high as 1.0777 before crashing to below 1.0700 as the EUR plunged.
Share markets were mixed as the war of words escalated in the Greek negotiations. Asian markets had risen strongly with the Nikkei and Hang Seng gaining more that 2% on news that Japan would pursue more security purchases and comments out of China that were broadly supportive of European efforts to fight the debt crisis. European bourses were mixed with the DAX gaining 044% while the FTSE fell 0.13%. However, the positive sentiment failed to flow through to US equities. The S&P 500 closed lower by 0.54% to. 1,343 as minutes of the Federal Reserve showed a division between members on the issue of further asset purchases.
Commodity prices were firm yesterday despite the rising concerns over the Greek debacle. The CRB index closed 1 point higher at 314.95. WTI crude prices continued to rise, gaining 1% to $101.75, after reports that Iran has halted shipments to Europe and US inventories rose. Precious metals were mixed with gold rising 0.6% to $1,728 while silver has fallen 0.1% to $33.30. Soft commodities were mixed with cocoa surging more than 5% while coffee fell 1.75%. Copper lost 0.33%.
WATCH THE LATEST INTERVIEW BY A MEMBER OF THE COMPASS GLOBAL MARKETS TEAM AT:
Feb. 15 (Source: Bloomberg) — Andrew Su, chief executive officer of Compass Global Markets in Sydney, talks about the outlook for the European sovereign debt crisis and its implications for global financial markets. He speaks with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)
GOLD continues to very much trade as we expect between a range of $1,712 to $1,728 overnight. Since our revision of our short bias to neutral gold has been stuck in a $1,710 to $1,750 band and we expect more of the same to come. We are beginning to suspect that a break will come with some upheaval that will cause increased volatility in the equity markets. The recent rise and reduction in equity markets has seen trading in gold extremely subdued and until we see some volatility in the markets we don’t expect this situation to change. There are two possible triggers at the moment for a expected spike in the gold price. Firstly, a rapid deterioration in negotiations over the Greek refinancing and secondly an escalation in the Middle East precipitated further tensions between Israel and Iran. For today look for more of the same. Buy on dips towards $1,710 and sell on rallies to $1,740 with stop losses outside of recent ranges.
AUD/USD continues the rollercoaster ride as the sentiment swings with every new headline. The Chinese reports about helping fund the European crisis was well taken during the Asia session with the AUD jumping from below 1.0700 to close the Asia session at 1.0750. The rally continued during the European morning but once more reports about Greece funding delays due to hurtles not being meet or likely to be meet the sentiment changed bearish with all of the gains being given with the AUD now closing NY at 1.0688. Helping the decline was solid selling from intraday traders that follow the link to US equity markets as it was up 0.6% at the US open and fell to be close to – 0.2% at the close. FOMC minutes helped the last slide with a more dovish outlook for growth. Important day for data with Employment Change and the unemployment Rate! Expectations of 10.5k of new job but a rise in the unemployment rate is clearly mixed. However, like last months correct forecast we like a number below zero as the European crisis continues to affect hiring.
DISCLOSURE AND DISCLAIMER
Compass Global Markets Pty Ltd (“Compass Global Markets”) ACN 144 657 885, Authorised Representative No. 377377, is a Corporate Authorized Representative of Calibre Investments Pty Ltd (Australian Financial Services License No. 337927). Please refer to the Financial Services Guide which is available through our website www.compassmarkets.com for more information regarding the financial services that we offer.
All references to prices, amounts and currency are in Australian dollars unless otherwise noted.
This report is provided for Australian residents only and is not intended for use by residents of any other country.
GENERAL ADVICE WARNING: The advice provided in this report has been prepared without taking into account your particular objectives, financial situation or needs. You should, before acting on the advice, consider the appropriateness of the advice having regard to these matters and, if appropriate, seek independent financial, legal and taxation advice before making any financial investment decision.
This report has been prepared for the general use of Compass Global Markets clients and must not be copied, either in whole or in part, or distributed to any other person. This report and its contents are not intended to be construed as a solicitation to buy or sell any security, product or asset, or to engage in or refrain from engaging in any transaction.
Compass Global Markets does not guarantee the performance of any investment discussed or recommended in this report. This report and the information used within may include estimates and projections which constitute a forward looking statement that express an expectation or belief as to future events, results or returns. No guarantee of future events, results or returns is given or implied by Compass Global Markets. Such statements are made in good faith and based on reasonable assumptions at the time of publication. However, such statements are also subject to risks, uncertainties and other factors which could cause actual results to differ substantially from the estimates and projections contained in this report or otherwise provided by Compass Global Markets.
Any information referencing past performance is not indicative of future performance. All information in this report has been obtained from sources believed to be accurate. Compass Global Markets does not give any representation or warranty as to reliability, accuracy or completeness of information contained in this report and therefore all responsibility is expressly disclaimed, whether due to negligence or otherwise. The information presented and opinions expressed in this report are given as of the date hereof and are subject to change without notice. We hereby disclaim any obligation to inform you of any changes after the date hereof in any matter set forth in this report.
Global Compass Markets, its affiliate and their employees may hold positions in the financial products, or securities or derivatives of, in the companies referred to in this report from time to time.
Analyst Certification: The views or opinions expressed in this report accurately reflect the personal views of the analyst(s) and no part of the remuneration of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this report. Any views or opinions expressed are the author’s own and may not reflect the views or opinions of Compass Global Markets unless specified otherwise.