WHAT DO I THINK HERE? Very tense, weak open followed by better sentiment towards the end of the week? This would usually be my playbook when important European Summits take place later, but this time around tension may remain into Feb 16th, next Monday. As predicted, Tsipras speech created fear overshadowed all the good feel from the strong NFP print of Friday.
Written on February 9, 2015 by ozan
WHAT DO I THINK HERE? Very tense, weak open followed by better sentiment towards the end of the week? This would usually be my playbook when important European Summits take place later, but this time around tension may remain into Feb 16th, next Monday. As predicted, Tsipras speech created fear overshadowed all the good feel from the strong NFP print of Friday. Remember that we had already closed last week timid w/ rising rate hike fears. This week’s nervous open is more due to Grexit fears & very poor China data over the w/end thou. Social media is full of predictions that Tsipras could only backpedal now if he faces “Cyprus 2″ capital controls reality. Weekend’s other huge news is announcement of Minsk Wednesday summit for Russia-Ukraine. If that leads to “peace” headlines, it would be a risk booster. On the other hand, Fiasco would trigger an even bigger sell-off. I would bet for the former & I would eventually bet against Grexit, but you would have to have stronger nerves, face some social-media-frenzy led dips & rely on Merkel’s craft(wo)manship again!
Russia continues to trade very strong, boosted by both higher oil & Merkel led peace hopes. If those fail & “GOP” plans to “arm Kiev” take the upper hand, expect a big backlash from Putin and Russian market. Turkey and Brazil local markets both trade very bad. BRL & rates continue to be hounded by Petrobras scandal. TRY & rates open very weak following President Erdogan’s salvo against the CBT even on his way to Colombia! The high print of Friday will make many beyond just “hurrah hurrah USA” camp hope that Yellen sounds “hawkish” on Feb 24, drops “patience” on March 18 & hikes in June. USD long bets will be put back on. USD/JPY can be a cleaner, less frustrating bet than going against the Euro at the moment. This morning, we see big Real Money players buy both USTs & Bunds! Rate bears don’t want to read such sentiment lines. They want to see a break of 2% now that they got a data they could rely on. Imagine a world in which Merkel gets a “peace pact” in Ukraine in Feb, Draghi starts QE in March & Yellen hikes in June. Varoufakis should perhaps think again when he claims “2015 is not different at all from 2011. If Greece exits, everything falls.” For the moment, that frenzy takes Risk prisoner, but you may remember it as big opportunity come late February, early March!
