Trading Journal

psaTrading posted:
European equities rebound and trade with modest gains after the sharp losses from yesterday. The Greek situation has taken quite confusing and sometimes contradictory contours. On the one hand, European Commission sources said that since the new leader was appointed to the Greek talks with Brussels Group, negotiations registered some progress although they remain some obstacles at the level of pension reform and labor market. But then, Finance Minister German proves skeptical about an agreement at the next meeting of the Eurogroup (11th). Today, Bloomberg reports that the Greek negotiators accused the European Commission and the IMF of being intransigent and thus prevent the completion of an agreement. Today is the first key date in a series of payments that Greece will have to do, having to repay the IMF 203 M €. In addition, the ECB will decide whether to increase the line of credit to Greek banks continue to depend on the Central Bank to operate. In this context, the results released this morning should not significantly influence the market as a whole.

Very interesting analisys!

The weakness and volatility that the equity markets have accused the last two sessions is essentially the result of three factors: the uncertainty with regard to Greece, the strength of the euro and the rise in yields. With economic data pointing to a slowdown in the US economy, it is natural and probable the appreciation of the Euro, and may convince many investors to close their selling positions in this currency. Another factor that has conditioned the equity markets is the general rise in yields of government bonds. In part, this rise in yields (bonds decline) due to the fact that many global investors have an overexposure to this market, trying to benefit from the ultra-accommodative policy of the ECB. Thus, as the Euro, when a strategy becomes exceedingly popular there is the risk of Simultaneous Overreaction. The rise in yields essentially penalizes utilities and companies whose business needs of high finance. Today will be held parliamentary elections in England. A political event is always a possible cause volatility, but these elections may cause additional volatility if one considers that the polls show a tie between Labour and Conservatives.

European shares jumped the most since January, buoyed by a surprise election win for British Prime Minister David Cameron’s party and improving U.S. jobs data.
Stocks extended gains after data showed the U.S. jobless rate in April fell to a six-year low, while payrolls climbed 223,000 (Below estimated 224,000), a faster pace than in March.

The statement from the Fed’s last meeting said that the continuous progression of the labor market is a necessary (but not sufficient) for the central bank to start normalizing monetary policy. If job creation was well above the estimated we would watch to an appreciation of the dollar and a rise in yields on sovereign bonds, which could translate into a scenario not very favorable to equity markets. If the generation of jobs was significantly lower than estimated, the dollar would lose value, yields should come down but fears about the economy should increase. Therefore, the best scenario seems to be the present one, which is near the forecasts.

Tomorrow Greece will have to repay 755 M. € to the IMF. During the end-of-week, the Greek government reduced its estimates for GDP growth, which is expected to grow 0.80% in 2015, less than the 1.40% forecast in March, when was addressed a letter, about the reforms, to the European Commission.
Technically, the main theme of the next few days will be the S & P test the area of ​​2120, which in recent months is working as resistance for the upward movement of the index. If the S & P over this area, then it will be possible a new rally.
Asian markets closed higher, reflecting the decision by China's central bank to reduce interest rates from 5.35% to 5.10%. Deposit rates were also reduced from 2.50% to 2.25%. This decision is the result of a evidences pointing to a sharp slowdown in the Chinese economy.

The European indices decline. Yesterday’s meeting of Eurogroup was marked by very timid advances towards an understanding between Greece and its European partners. Even with regard to the meeting statement did not prevail an agreement, since Greece intended to be mentioned a breakthrough in the talks, while other countries only recognized the existence of a more constructive atmosphere, prompting again for what remains. Tomorrow is the next event, the ECB decision regarding the liquidity lines available to Greek banks. In recent days there were some rumors, that last week, when the government bonds suffered sharp losses, the ECB began to aggressively buy European debt, avoiding a more serious situation. From last week’s bond markets performance we can point out two observations. The first, already known, is that the ECB functions as a network protection for European debt markets. The second, more worrying is the fall that European bonds have suffered denotes the risks that arise when an investment becomes too popular. In sectoral terms, the decision of China’s central bank to reduce interest rates and the appreciation of the dollar over the past two sessions should continue to ensure overperformance to the mining sector.

It seems that Greece is running out of options and I'm curious about the upcoming development of the crises.

The European indices negotiate with slight gains, reflecting the recovery on Wall Street after the European close. Before the opening were published variations of GDP in Germany and France. The German economy grew by 0.30% in Q1 2015 compared to the last quarter of 2014. Economists had anticipated an increase 0.50%. In the same period, the French economy grew 0.60%, beating economists' forecasts. Despite the negative deviation of German growth, these data demonstrate that the economic recovery in the Euro Zone is gaining some consistency. However, equity markets are going through a very complex situation. It is important that the euro zone shows that is economically recoverable (expectations regarding this matter were one reason for the preference of global investors for European markets) but is also relevant that this recovery does not cause an appreciation of the Euro and yields sovereign debt. Today, the ECB will decide on the line of liquidity that makes available to Greek banks, as well as on how calculates the guarantees that these institutions have to deposit to receive loans from the ECB. The Treasury will auction 875 M.€ of Greek debt with a 13-week maturity, to repay debt expiring on Thursday.

The European indices started the session trading down, again with the debt market to influence investor’s decisions. However, attention should also be focused on the evolution of the Euro / Dollar after yesterday the dollar having depreciated following the publication of retail sales in the US, an indicator that disappointed the market.
Greece’s economy fell back into recession in the first quarter, data released Wednesday Showed. The contracting economy Increases the Measures on Tsipras to meet conditions in September by euro-region Governments and the International Monetary Fund for accessing financial aid.
Investors also await the ECB President Dragui’s speech which will be held today at 16:00H.

European indexes climb, reflecting the good performance of Wall Street and Mario Draghi’s words. Yesterday the ECB President reiterated the full support of the Central Bank to the European economy through its quantitative easing program, which will last as long as necessary. These comments are important for two reasons. The first is that dispels some concerns that had arisen that the ECB, given the improvement of the European economy could reduce this program. The second is that financial markets often need evidence to support their convictions.

The European indices are trading slightly higher. Investors should continue to show up prudent and to monitor the behavior of essentially three markets: The American Stock Market, the Bond and Foreign Exchange markets. In the US, the S & P continues to test a major resistance zone, which if exceeded could positively influence the European markets. In the currency market, the euro retreated slightly but still remains the possibility of the up trend to continue as investors may buy more euros. In the bond market, European sovereign yields advance slightly. In addition, the rumors about Greece remain a source of volatility. Last Friday, Tsipras Prime Minister showed his optimism regarding the negotiations but CNBC reports that supposedly the Greek Government would have informed the IMF currently does not have capacity to repay the next payment.

A survey conducted by Merrill Lynch showed that the vast majority of global managers have a level of liquidity well above the average of recent years. If the S & P start a new rally, these managers will be forced to allocate this liquidity to equity markets in order to follow their benchmarks.

Yesterday, the European currency suffered sharp losses by virtue of the words of an ECB member, who said that the ECB should accelerate the pace of debt purchase program. The EURUSD pair broke today the level 1.11, so the upward movement of the last month is definitely compromised, which is very positive for the European Stock Indexes.

Today begins the meeting of European leaders in Riga and which will continue tomorrow. The Greek Government has always mentioned that the distance between the positions of his country and its partners were essentially political and not technical. Therefore, it is not excluded that during this event, to be held some overtures between the parties. Athens seems to have a more flexible approach than in the past regarding several important matters: Privatizations; The introduction of a new tax on banking transactions and fiscal targets for 2015. Yesterday, information sources cited an Athens government spokesman who said that if the impasse remains until 5th June (date of repayment to the IMF), Greece may not be able to honor this commitment. Today starts in Sintra a conference which bringing together various members of the major central banks and will continue until Saturday. Among the participants include Mario Draghi and the Vice President of the Fed Stanley Fisher.

The European indices started the session negotiating without major fluctuations. In the currency market, the euro continue to be traded above 1.11, a crucial support that was broken yesterday and could be a sign for the continuation of the downward movement.

Despite the earning season is completed, some companies continue to provide information on its activity. The German Merck said it expects its sales to increase about 5% in its core segments, before the new drug development perspective.

Today, attention will focus on the publication of economic indicators that will help investors to shape their expectations for future interest rates. The agenda of this week does not provide for the publication of first-line indicators, with the exception of GDP, whose new calculation will be announced on Friday.

European markets deal in consolidation after the fall of the stock exchanges in yesterday’s session. Markets can now benefit from the recovery in commodity prices, especially the price of crude oil and copper.

Central Europe stock markets will be more positively influenced, by the Greek situation than conditioned negatively by the appreciation of the Euro. Theoretically, if the prospect of improving investors regarding the Greek situation should enhance the Euro it is therefore reduced the perceived risk of the eurozone.

After months of deadlock, the news reported by the Greek authorities that pointed to a breakthrough appeared to be the decisive step to a solution. However, this advance was categorically denied by several European leaders, thus constituting an unexpected setback in this process. Apparently, the “triumphant” message of the Greek negotiators was reported in the press even before the start of the meeting with the European partners. According to CNBC, negotiations will resume on Sunday, date the Greek authorities said they would announce the agreement. These advances and setbacks can make the investors more skeptical in relation to real advances that negotiations can achieve.