Odd prices. Irish 10-yr ylds still down from Fri. Can Ire access funds if Spn/Italy at risk of tailspin? Is it hope of softer bailout terms?
10-sec horizon of markets is funny sometimes. Greek vote relief gives way to disappointment there won’t now be G20 cenbank boost…hmm
LONDON (Reuters) – World markets rallied on Friday as investor fears of euro zone chaos following Sunday’s Greek election were at least partly offset by talk of a coordinated response by the world’s major central banks to any market dislocation.
G20 officials told Reuters on Thursday that the top central banks stood ready to stabilize financial markets by providing liquidity if the election result causes financial upheaval.
Curious to compare Merkel words today w/ any made after Sunday. Tho suspect resolution now needs 2013 German election -if anything left then
The Greek vote next Sunday now stands front and centre of pretty much all investment thinking, but the problem is that it may still be days and weeks before we get a true picture of what’s happened, whether a government can be formed and what their stance will be. If the new parliament cannot clearly back the existing bailout, even after a bout of horse-trading, then a game of chicken with Europe ensues. Eurogroup meets again on Thursday and there’s a German/French/Italy/Spain summit on Friday. But G20 leaders gather in Mexico as all this is unfolding, so they will certainly be quorate if some sort of global response is required to any initial market shock. What’s more, the FOMC is meeting Tuesday and Wednesday should Bernanke feel the US needs urgent insulation from the fallout regardless of broader action. But it’s certainly not beyond the bounds of reason that coordinated central bank action materializes next week if markets do indeed go skewways after the Greek poll. They have all clearly been consulting on the issue lately via telephone and bilaterals. And the assumption of more QE is there among investors. Three quarters of the 260+ funds polled by BoAMerrill Lynch this month expect another ECB LTRO by the end of Q3 and almost a half expecting more Fed QE over the same time.
And maybe it is this assumption of massive policy response that’s preventing markets capitulating outright. Money is gradually going to ground, but it’s not yet thrown in the towel completely as you can see from major equity indices, volatility gauges and interbank spreads etc. And there are a lot of headwinds everywhere over the next six months, the US election, fiscal cliff, end of operation twist stateside – and that’s in one of the few major western economies that was generating any significant growth this year. In other words, there are no shortage of arguments for another monetary boost. A heavy econ data slate during the week will also reveal just how much the world economy has run into sand this quarter. The standouts are the flash PMIs for June, the US Philly Fed index for June and UK jobs and inflation numbers.