Tuesday, 21 February 2012

Market thoughts

Equities: Strength is remaining with what I think is investors keep buying in the cash market as they don’t want to miss the rally, and the PBOC’s cut in their RRR gave them a bid yesterday. I can see added strength in the near future as the European shenanigans are pushed aside for the time being. But, I do believe that there are sellers waiting, there will be a point when long term investors decide to get involved and sell into a rally as the market will get more sensitive to negative news.

Bonds: As I think the Greek nonsense is coming to a temporary halt I can see the flight to safety bonds selling off, but if there is a big equity squeeze I don’t think the bonds will sell off as much as participants may think. I also think that Greece will come out the limelight then come back, whether it is in a week to 2 weeks or a month to 2 months, I don’t know. I believe that this ‘trigger’ what ever it is that will bring Greece under pressure again will bring a fresh wave of buying in the market.

Euribor: Can’t really have much of an opinion as these levels, but I do slightly favour the downside from here, however that won’t stop me buying at levels I deem reasonable. In terms of the curve I think the fronts will maintain more of a bid than the pressure that will be on the backs. So I think spreads will remain some sort of bid.

Short Sterling: It looks like it is ready to take a further wallop in the near future as we have burst out of a tight range on reasonable volume. However the fact that everyone thinks this could lead to a squeeze, and remember that gbp LIBOR is still in an uptrend.

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