European morning Wrap: Abandon hope all ye who enter here
- EU task force head says Greece showing great willingness to implement reforms (start with an upbeat headline, the rest is pretty dire fare)
- French flash Sept manufacturing PMI 47.3. worse than median forecast of 48.5
- German flash Sept manufacturing PMI 50.0, pretty much in line with median forecast of 50.1
- Euro zone flash Sept manufacturing PMI 48.4, pretty much in line with median forecast of 48.5. Lowest read since August 2009
- Swiss ZEW investor sentiment -75.7 in Sept, down from -71.4 in August
- Euro zone July industrial orders -2.1% m/m, +8.4% y/y, demonstrably weaker than median forecasts of -1.1%, +10.6% respectively
- UK CBI Sept manufacturing order book balance -9, weaker than median forecast of -5
- ECB buys Italian, Spanish government bonds………..again
- Goldman Sachs Sutherland: Greece major threat to the euro zone due to the contagion risk (that folks is why they pay him the big bucks)
- ECB study, co-authored by Stark, says fiscal imbalances in euro zone risk undermining stability, sustainability of the EMU
- BOE’s Posen: Central bankers have exaggerated fear of rising inflation expectations – WSJ
- All states must back ECB if euro is to be saved – Simon Nixon in WSJ
Almost, but not quite, a classic risk-off morning, as global financial markets continue to react to the Fed’s relative inaction yesterday. As worries surrounding US/Global growth continue to increase, so European stocks and commodities continue to get hammered while US treasury yields fall. The dollar has been a major beneficiary against this backdrop, commodity currencies big losers.
EUR/USD down at 1.3440 from early 1.3545, having been as low as 1.3436. Initially we saw a slight rallyette in the wake of the EU task force heads’ comment on Greece, but weaker than expected French PMI data soon had the euro bears refocused.
European stocks opened sharply lower and just continued to tank, helping drag EUR/USD down. Stops through 1.3525, and more markedly 1.3495, accelerated the sell-off.
Cable is down at 1.5415 from early 1.5455, having been as low as 1.5402 so far. China was seen buying in the 1.5435/45 area, but even they couldn’t turn the tide. Talk now of 1.5400 barrier option interest in place.
AUD/USD down at 9825 from early 1.0015, underminned by heavy commodity losses. USD/CAD is up at 1.0270 from an early 1.0115.
Poor little ol kiwi has also been hammered, USD/NZD down at .7815 from an early .7980. It had the added burden of having to put up with rumours of an imminent New Zealand downgrade.
USD/CHF has seen sharp gains, up at .9175 from an early .9020, the swissy very noticeably not garnering any benefit from the accelerated risk aversion being seen elsewhere. Seems those short the EUR/CHF cross noticed and continued to bail out of their short positions. The cross is up at 1.2330 from an early 1.2215.
Anyone wanting to thank me for the incredibly early heads up on the EUR/CHF cross please feel free