“Risk off” is the theme of the day as the EU and IMF fail to see eye to eye on what should be done next with Greece. Market participants had been keenly awaiting the outcome of the meetings in Brussels yesterday given the passage of the recent austerity bill and 2013 budget in Greek parliament. However, those that may have been optimistic of a final resolution to the country’s immediate debt requirements were sorely disappointed. At the core of the issue is the fact that EU leaders want to give Greece an extra two years to reach its debt ratio to GDP target of 120% but in contrast the IMF are in favour of restructuring Greece’s debt. This conflict of opinion at a critical juncture for the Euro-area does not bode well for Greece as the troika is ultimately responsible for signing off any near-term distribution of financial aid and is critical in order for Greece to remain a solvent nation.
Separate to the European debacle is the lingering concerns over the US fiscal cliff and economic data out of Australia has only compounded the negative sentiment after NAB business conditions printed at its lowest since May 2009.
The net result of the above macro factors has seen a flight to quality with the USD and JPY benefiting from safe haven flows while EUR/USD languishes at fresh two month lows. As a consequence of the strengthening USD commodities have trended lower and as such weighed on the AUD which also probed the 1.0400 level after worse than expected business confidence and conditions data from the NAB. Meanwhile in the equity space all indexes trade firmly in the red as the risk off theme continues to weigh.
Looking forward we have the monthly JPY 2.5trl 5 year JBG auction, due at 0345GMT/2145CST and the release of Japanese Industrial Production shortly after.
12 Nov 2012 - 22:10 - Fixed Income Data - Source: RANsquawk
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