Greek Assets Tumble, Global Santa Rally Briefly Halted As Renewed Threat Of Grexit Looms
Up until the Greek presidential vote made headline news, the biggest event of the day was not the full-blown bubble levitation in the Shanghai Composite which rose another 0.33% to a fresh 4 year high of 3,168 on expectations the recent PBOC targated intervention will transform into a full blown rate cut, but the sudden drop in the USDJPY and its first derivative, the Nikkei stock index, which turned negative on Monday after the health ministry announced a suspected case of the deadly Ebola virus, spooking investors but boosting health-related shares. A man who returned to Japan from Sierra Leone on Dec. 23 was suspected of contracting Ebola, the Ministry of Health, Labour and Welfare said. Test results are expected by Tuesday morning. If confirmed, it would be the first case positive diagnosis in Asia.
As a result, the Nikkei benchmark fell 0.5 percent to close at 17,729.84 points, wiping out early gains inspired by last week's strong Wall Street performance. Even so, the Nikkei is on track for a yearly rise of almost 9 percent (in Yen terms, it is quite negative if expressed in USD) as the weak yen and aggressive asset buying by the Bank of Japan have helped offset the country's disappointing economic performance.
But it was the result of the third and final presidential vote, which came 12 Yes votes short of the 180 threshold to elect a Greek president, that has sent Greek risk assets reeling and has spilled over into European stocks. Even US-based algos appear to have noticed and for some inexplicable reason futures are not of their now mandatory Green color.
As noted earlier, following the failed vote Greek banks are cratering, with many entering a bear market as of the last price update, such as Eurobank Ergasias -23%, Piraeus Bank -21%, National Bank of Greece down 18%, Alpha Bank 17% lower. While in the past this would have been enough to send European shares limit down and peripheral bonds bidless, algos have forgotten their programmed kneejerk reaction since Greece has been off the front page for so long. As a result, Europe is down but not nearly where it would have been had today's vote taken place a couple of years ago. Then again, with the USDJPY far more important than what Greece may or may not do, all that will take for the Santa rally to resume, if only in the US, is for "someone" to buy a few yards of Dollar-Yen, push the pair to 121, and all shall be well once more.
Ruble declines for second day. The Italian and Spanish markets are the worst-performing larger bourses, the Swedish the best. The euro is little changed against the dollar. Greek 10Y bond yields rise; French yields decline. Commodities gain, with copper, nickel underperforming and wheat outperforming. U.S. Dallas Fed index due later.
Market Wrap:
- S&P 500 futures down 0.2% to 2080.6
- Stoxx 600 down 0.2% to 343.3
- US 10Yr yield down 2bps to 2.23%
- German 10Yr yield down 2bps to 0.57%
- MSCI Asia Pacific up 0.5% to 138.5
- Gold spot down 0.3% to $1192.9/oz
Bulletin headline summary from Bloomberg:
- Treasuries gain with EGBs, German 10Y yield falls to new record low 0.563% after Greek Prime Minister Samaras failed in his third and final attempt to persuade parliament to back his candidate for head of state.
- Greece faces snap elections early in the New Year, may bring in a party opposed to austerity and reawaken the region’s sovereign debt crisis
- Prognosticators are convinced Treasury yields have nowhere to go except up; calls for higher yields next year are the most aggressive since 2009, when USTs suffered record losses, according to data compiled by Bloomberg
- After pumping record amounts of cash into Japanese shares last year, foreign investors have hardly added to holdings in 2014, providing the clearest look at how global investors have become disillusioned with Prime Minister Abe after he pushed through a tax increase in April that sent Japan into recession
- Japan’s prime minister may gain the direct power to mobilize troops in the event of an intrusion into Japanese waters by foreign ships, the Nikkei newspaper reported, citing a draft of new security legislation
- Japan detained the captains of two Chinese coral-fishing boats for refusing to allow their vessels to be searched, incidents that came amid a report the countries may resume talks to establish a maritime hotline
- Planes and ships from four nations scoured the Java Sea for an AirAsia Bhd. jet that vanished more than a day ago with 162 people on board, as Indonesian investigators said the jet had likely crashed to the bottom of the sea
- Sovereign yields mostly lower. Asian stocks mostly higher; European stocks and U.S. equity-index futures fall. Brent crude higher, gold and copper fall
The US event calendar is spares, with only the Dallas Fed Mfg Activity Index on deck at 10:30 am Eastern, estimated at 9.0, the prior was 10.5.
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