G3 Recap 6-15-11

Main Items:

  • The 3 week long protest in Athens turned violent today. Two PASOK MPs said on Tuesday they would not vote for the new austerity measures, reducing the government’s majority to four. Papandreou announced that he will form a new government and have it ratified in a vote of confidence in parliament on Thursday.
  • US Core CPI rose to 1.5% YoY in May vs 1.4% exp and 1.3% prev. Rent and OER both contributed 0.1%.
  • Empire Manufacturing dropped to -7.79 in June vs 12 exp and 11.8 prev.
  • NAHB Housing Market Index dropped to 13 in June vs 16 exp and prev.
  • Moody’s put Credit Agricole, BNP Paribas, and Soc Gen on review for possible downgrade after reviewing their exposure to Greek debt. Moody’s said that CA and BNP are unlikely to lead to downgrades more than one notch, while SocGen could be downgraded by 2 notches.


  • UK Claimant Count Rate was unchanged at 4.6% in May as exp. Jobless Claims, however, rose to 19.6k vs 6.5k exp and 12.4k prev.
  • South Korea UE dropped to 3.3% in May vs 3.7% exp and 3.6% prev
  • Australia Westpac Consumer Confidence declined to 101.2 in June vs 103.9 prev


  • Looks like Greece will dominate headlines until the parliament votes on the new austerity measures, which needs to happen before the IMF meeting on July 8th. Depending on how the vote goes, things can bounce or deteriorate quickly. In the interim, this suggests continued downside for risk assets, and German yields.
    Looking through recent issues, however, risk assets are likely not so far away from a tradable short term low. Several surveys, including the AAII and the BAML positioning surveys, suggest that risk aversion is now high enough to sustain a decent bounce in US equities. 2yr Treasury yields are just 6bps above all time lows. What’s missing is some sort of catalyst.

2 thoughts on “G3 Recap 6-15-11

  1. first brics rolled over due to inflation related tightening so we now also have flat curves there … then the commodity based equity indeces rolled over with tsx/asx/ftse all topping … now its time for the high growth or beta indeces to show there mettle … been watching omx/kospi/hang seng/nasdaq/russell and these too rolling over,

    we may have gotten to the point where there are just too many cans trying to be kicked at once or where not enough fingers left to plug the holes. i suspect that high growth related risky assets will continue rolling over whereas commodities are not and will not follow as hard. sell sek/cad seems a good reflection of that … or maybe as QE2 finishing DXY has more momentum on the upside.

    ECB policy mistake reflected in money market bull flattening rather than just the whole curve bear flattening. cash is safest place to be.

    1. Sorry Bert – was out yesterday.

      Yeah, definitely a lot of uncertainty out there. Given the high volatility, I definitely agree that cash weights should be much larger than usual. Right now, all I have on are some structural RV bets across global equity markets. (super tiny given the low expected sharpe ratios) I’ve been almost day trading EU rates the past few days. But that’s about it – I don’t see a lot of great risk reward trades here, other than short term day trade type bets.

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