Global Markets Overview – December 10, 2014

Greece concerns rock equities

Global jitters continued to rock sentiment, with Greece at the forefront of the issues. Greek banks were heavily sold off and led declines in European stocks.

Greek Prime Minister Samaras' decision to bring forward the process of selecting a new head of state to 17 December seems to have driven the move. If a decision isn't reached by the end of the year, an early election will be called. Essentially, the market doesn't want a party that could disrupt the bailout agreement, which in this case is the anti-bailout group 'Syriza'. Renegotiating the terms of the current bailout plan would be detrimental for Europe at such a fragile time.

All these developments pushed investors to safe haven assets, with gains for gold, the yen and treasuries. While Europe experienced a significant slide, US trade was fairly quiet as the Fed slipped into its communication blackout period. US equities seem somewhat immune to developments in the rest of the world at the moment. Speculation remains rife, though, that the 'considerable time' reference will be dropped from next week's meeting. Positioning ahead of the meeting will be interesting in coming sessions.

China CPI in focus

China was a big talking point yesterday, retreating sharply after having been significantly higher earlier in the session. After weeks of outperformance, indices in China were massively overbought and it seems investors were waiting for a trigger before taking profits off the table.

Regulators in China changed a variety of bond market rules, which will restrict the use of lower-grade corporate debt as collateral. The market saw this as a form of tightening as it drives financing costs higher.

Today we receive China's CPI and PPI at 12.30pm AEDT and this will be a significant reading for today's session. It is likely to have a significant bearing on risk today, and could also determine whether Chinese equities recover from yesterday's declines.

AUD/USD is just hanging around the $0.8300 mark and the case for longs is limited right now. Uncertainties around China will only encourage the bears, and locally we have Westpac consumer sentiment and home loans data to look out for. A concern for the bears is that the pair seems oversold at the moment but momentum remains firmly to the downside.

Mildly weaker start for the ASX 200

Ahead of the open we are calling the local market down 0.2% at 5280. After a sharp sell-off yesterday, we might see some calm at the open. However, given the risk-off nature of the overnight session, it's hard to rule out further weakness.

Gold names could be a bright spot after the precious metal surged to a six week high. Iron ore has resumed its descent, dropping to 69.06 yet again, and this will keep the pure plays under pressure. Investors will be watching iron ore futures closely for some direction when they reopen today.

Oil finally bounced and this could provide some reprieve for the energy space. Investors are likely to look towards the defensives for some comfort, particularly in the healthcare space.

[Kick off your trading day with our newsletter]

More from IBT Markets:

Follow us on Facebook

Follow us on Twitter

Subscribe to get this delivered to your inbox daily