Risk market strength

In spite of the euro zone downgrades seen at the end of last week, risk markets have successfully shrugged the news off. This has been put down to investor confidence as more and more traders believe that central banks will prop up the system and prevent another deterioration of the type we saw last summer. Weak Chinese economic figures have put more speculation and rumours into the market that the PBoC will embark on another round of rate cuts, this has aided a rally in commodities and Asian stock markets. The 3 year LTRO has helped improve sentiment in Europe as participants have chomped up the euro zone bond offerings this month to improve the repo collateral situation. US data is continuing to improve and despite this there is more and more talk of the Fed possibly going to embark on another round of QE. The overall belief in the market seems to be that the worst is behind us. However last year was a perfect example of just how fragile the market is, and how everything can change in an instance.