TraderPlanet Market News - Forex
How to Trade a Greek Default
A new a day, a new headline for Greece. Today, reports are floating around the market that a Greek debt deal continues to inch closer. The European Central Bank is reportedly willing to take a haircut on its Greek debt holdings.Yet, given the general trend in the way events have transpired, investors may come to believe that a Greek default is all but assured at this point.In that event, traders may look to play the Greek in a number of ways.Financials: European financials remain under the protection of a short-selling ban. Thus, this trade could manifest itself in the form of a proxy trade on US financials or other financials around the world. This was theorized to be behind the movement in US financials last summer. Financials have rallied strongly to begin the year, perhaps shaking off that trading thesis. If a credit event occurs, US financials could come under fire once more; perhaps getting that major pullback the market has been looking for. Still, if a Greek default is well managed, value investors could look to get into these stocks as aggressive speculative short selling could send them lower than fair value.Currencies: The euro is the clear trade here. Whenever speculation has risen that Greece would soon default, the currency has sold off. Inversely, when traders have come to believe that the European situation was on the path to resolution, the euro has rallied. Following this pattern, traders should expect that a Greek default would send the currency trading down.However, this could be a rapid move in either direction, and traders who get in too early could be run over if the situation develops in an unexpected fashion.Other currencies can also be traded in a Greek default. For example, the US dollar and Japanese yen could be anticipated to rally. If a Greek default is interpreted as a deflationary event, commodity prices could take a hit and that could lead to a sharp selloff in commodity currencies like the Canadian and Australian dollars.Commodities: Commodities could move in the event of a Greek default. Industrial commodities like oil and copper could sell off on expectations of deflation and recession. Precious metals may initially trade lower but then rebound if central banks like the ECB or Federal Reserve intervene to keep the economy moving along.On Wednesday, Standard & Poor's Gill stated that current expectations are for an orderly default. In that instance, the market may have little volatility, as market participants already consider such a scenario to be "priced-in."Yet, has an event such a sovereign default ever been orderly? Neither nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.
Goldman Long EUR/USD, Target 1.38
See Bloomberg reporter Sara Eisen's tweet here
Financial Breakfast: Morning News Summary for February 08, 2012
Wednesday, February 8, 2012 When Ronald Reagan took office, the U.S. national debt was only about 1 trillion dollars. Roche Holding (OTC: RHHBY) ILMN) without a fight, as the company's board has rejected a takeover bid of $5.7 billion, saying that it is "grossly inadequate." Time Warner (NYSE: TWX) Reports Q4 EPS $0.94 vs $0.87 Est; Revenues $8.19B vs $8.10B Est Sprint Nextel (NYSE: S) Reports Q4 EPS $(0.43) vs $(0.37) Est; Revenues $8.72B vs $8.68B Est CVS Caremark (NYSE: CVS) Reports Q4 EPS $0.89 vs $0.89 Est; Revenues $28.32B vs $28.12B EstDomesticU.S. Equity Markets trade higher as Dow futures trade up about 19 points. U.S. Dollar trades about 0.11% lower.To see more pre-market news, click OverseasEuropean markets are higher in afternoon trading. Britain's FTSE 100 added 0.09%, Germany's DAX gained 0.64% and France's CAC 40 advanced 0.42% on the session. Asian stocks ended the session higher as well. China's Shanghai added 2.4%, Japan's Nikkei 225 gained 1.1%, and Hong Kong's Hang Seng advanced 1.54%.To see more overseas news, click UpgradesPiper Jaffray Upgrades Open Table (NASDAQ: OPEN) from Neutral to Overweight, Raises PT from $38 to $64 JP Morgan Upgrades Vishay Intertechnology (NYSE: VSH) from Neutral to Overweight, Raises PT from $11 to $15.5To see more of today's upgrades, clickCitigroup Downgrades Walgreen (NYSE: WAG) from Neutral to Sell, Lowers PT from $35 to $28 Deutsche Bank Downgrades Netgear (NASDAQ: NTGR) from Buy to Hold, Lowers PT from $42 to $40To see more of today's downgrades, click OnMBA Mortgage Applications reported 7.5% from a -2.9% prior readingTo see more economic news, click EarningsTime Warner (NYSE: TWX) Reports Q4 EPS $0.94 vs $0.87 Est; Revenues $8.19B vs $8.10B Est Sprint Nextel (NYSE: S) Reports Q4 EPS $(0.43) vs $(0.37) Est; Revenues $8.72B vs $8.68B Est CVS Caremark (NYSE: CVS) Reports Q4 EPS $0.89 vs $0.89 Est; Revenues $28.32B vs $28.12B Est Level 3 Communications (NASDAQ: LVLT) Reports Q4 EPS $(0.80) vs $(1.06) Est; Revenues $1.58B vs $1.63B EstTo see more earnings announcements, click CorporateTime Warner (NYSE: TWX) Raises by 11% L-3 (NYSE: LLL) Increases by 11% to $0.50 Roche Holding (OTC: RHHBY) ILMN) without a fight, as the company's board has rejected a takeover bid of $5.7 billion, saying that it is "grossly inadequate."To see more corporate news, click CommoditiesPrecious metals are trading lower, with gold posting losses of about 0.01% Energy futures are trading higher, with crude oil posting gains of about 0.9% Natural Gas futures are lower by about 2.87% and copper is trading higher by about 1.01%To see more commodities news, click Technical Levels for Futures and ForexName Resistance-2 Resistance-1 Mid Pivot Support-1 Support-2 E-Mini S&P 500 1354 1349 1340 1335 1326 Gold 1777 1762 1737 1722 1697 Crude 101.19 99.96 97.90 96.67 94.61 Natural Gas 2.68 2.59 2.52 2.42 2.35 EUR/USD 1.3382 1.3320 1.3208 1.3146 1.3033 US Dollar Index 79.63 79.11 78.84 78.31 78.04Subscribe Click to subscribe to this newsletter. Receive it daily to your inbox!
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Comparing Germany to Italy
The German economy stands in sharp contrast to the rest of Europe. For example, unemployment, which has been troublesome for many of the other economies in Europe, is approaching its lowest level in 30 years, coming in at 6.7 percent in January.German unemployment has been decreasing steadily for about the last two and a half years. Recently, total German employment increased by 1.3 percent, which brought the number of jobs to a record 41.25 million.The flexibility of the labor market in recent years could be caused by the so-called Hartz reform. This labor reform first came into effect in early January 2005, focusing on the extreme flexibility of the job market.The Hartz reform began with the deregulation of labor laws. The reform was intended to create a more flexible labor market. It was believed that its implementation would improve conditions for small businesses and make it more attractive for companies to hire new employees.Among the most important innovations was the strong push towards the creation of more part-time jobs. In 1991, 25 percent of the German workforce was part time; now that figure stands at 42 percent.It is interesting to compare the situation in Germany to Italy. The Italian labor market is characterized by its rigidity. In Italy it is not uncommon for an individual to stay with a single company for the duration of their career. However, this lack of mobility limits the creation of new jobs.A debate currently rages in Italy about the decline of the concept of a “permanent” job. The debate was partially triggered by a controversial statement from the Italian Prime Minister in which he criticized the concept of workers being able to stay with a single firm their entire lives. The metalworkers union IG Metall (3.3 million members) is proposing that the average wage be increased by 6.5 percent. The union argues that this increase in wages would actually boost employment by increasing the spending power of Italian workers.According to François Cabau, an economist at Barclays Capital, the gap between the German economy and other Eurozone countries should increase this year.It will interesting to see what effect this divergence has on the Eurozone going forward.
Greek Rumors Continue to Boost Euro
On Tuesday, the EUR/USD pair rallied in early morning trading. After headlines broke that suggested that Greece was about to finalize a deal with its creditors, the chart of the currency pair had a notable move, with the euro spiking about 0.50% against the US dollar.The move in the euro makes intuitive sense, as the currency has been under a tremendous amount of speculative pressure. Many currency traders may have gone short the euro on hopes that the currency would weaken significant—either in the event of a disorderly Greek default or a Greek exit.If Greece were to default, holders of euros may run to other currencies, as the possibility of the euro staying fully intact would decline notably.However, if Greece is able to come to terms with its creditors in a manner that would lead to a clean resolution, then the euro could quickly rally and may continue to rally. The currency may even strengthen to an illogical degree, propelled higher by shorts forced to cover in a cascading, short-squeeze effect.Yet, traders may have seen this headline before. In fact, it has been consistently rumored in the past few weeks that Greece was on the verge of reaching a deal. Each of these supposed imminent deals has lead to short-term buying pressure for the euro, but the currency has later pulled back after no deal appeared—continuing to hover right around the $1.30 price level.Thus, Tuesday's headline may be seen to have little merit. Still, traders with large short positions may use any headline to back out of some of their position, lest they be completely run over in a dash to cover positions.Greece in a massive general strike on Tuesday, with reports that 15,000 workers and members of leftist organizations were marching in Athens to protest continued budget reforms.Another interesting wildcard in the greater predicament is the possibility that later Greek governments could ultimately renege on any deal reached this month.Even if the deal was favorable to the Greek budget, future elected Greek governments could fail to meet their obligations. There may little to compel them, and poverty-stricken Greek government workers could prove to be a powerful electorate.At the same time, the desire to avoid another "Lehman Event" may compel Eurozone officials to prevent a disorderly default from occurring. Although European officials have been adamant in their desire to ensure that Greece does not default explicitly, they have had over a year to prepare for that occurrence.Neither nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.
Financial Breakfast: Morning News Summary for February 07, 2012
Tuesday, February 7, 2012 In 1990 the $50 and $100 bills had security strips and microprinting added to them. GlaxoSmithKline (NYSE: GSK) Reports Q4 EPS 28.4 Pence vs 28.3 Pence Est Toyota Motor (NYSE: TM) Oct-Dec Net Profit Y80.9B; Lifts FY Net Profit Outlook To Y200B From Y180B Emerson Electric (NYSE: EMR) Reports Q1 EPS $0.50 vs $0.51 Est; Revenues $5.31B vs $5.29B Est BP (NYSE: BP) Reports Q4 EPS $2.41 May Not Compare vs $1.59 Est; Revenues $96.34B vs $86.23B EstDomesticU.S. Equity Markets trade lower as Dow futures trade down about 32 points. U.S. Dollar trades about 0.13% higher.To see more pre-market news, click OverseasEuropean markets are lower in afternoon trading. Britain's FTSE 100 slid 0.5%, Germany's DAX lost 1.02% and France's CAC 40 fell 0.61% on the session. Asian stocks ended the session lower as well. China's Shanghai lost 1.64%, Japan's Nikkei 225 fell 0.13%, and Hong Kong's Hang Seng slid 0.05%.To see more overseas news, click UpgradesBrean Murray Carret & Co. Upgrades Urban Outfitters (NASDAQ: URBN) from Sell to Hold Piper Jaffray Upgrades Corning (NYSE: GLW) to Overweight Rating; Increases PTTo see more of today's upgrades, clickBank of America Downgrades Achillion Pharmaceuticals (NASDAQ: ACHN) from Buy to Underperform, Lowers PO from $11 to $10 Citigroup Downgrades Aon (NYSE: AON) from Buy to Neutral, Lowers PT from $53 to $51To see more of today's downgrades, click OnIBD/TIPP Economic Optimism and JOLT Job Openings are set to report at 10:00 a.m. ET US Consumer Credit is due at 3:00 p.m.To see more economic news, click EarningsGlaxoSmithKline (NYSE: GSK) Reports Q4 EPS 28.4 Pence vs 28.3 Pence Est Toyota Motor (NYSE: TM) Oct-Dec Net Profit Y80.9B; Lifts FY Net Profit Outlook To Y200B From Y180B Emerson Electric (NYSE: EMR) Reports Q1 EPS $0.50 vs $0.51 Est; Revenues $5.31B vs $5.29B Est BP (NYSE: BP) Reports Q4 EPS $2.41 May Not Compare vs $1.59 Est; Revenues $96.34B vs $86.23B EstTo see more earnings announcements, click CorporateBank of Commerce (NASDAQ: BOCH) Holdings Authorizes Stock of up to 6% of Outstanding Shares Wright Medical Group (NASDAQ: WMGI and Limited U.S. Launch of the PROPHECY INBONE Pre-Operative Navigation Alignment GuidesTo see more corporate news, click CommoditiesPrecious metals are trading lower, with gold posting losses of about 0.5% Energy futures are trading lower, with crude oil posting losses of about 0.80% Natural Gas futures are higher by about 0.55% and copper is trading lower by about 1.62%To see more commodities news, click Technical Levels for Futures and ForexName Resistance-2 Resistance-1 Mid Pivot Support-1 Support-2 E-Mini S&P 500 1346 1342 1336 1332 1326 Gold 1747 1735 1724 1711 1701 Crude 98.34 97.70 97.04 96.40 95.75 Natural Gas 2.67 2.63 2.53 2.49 2.39 EUR/USD 1.3212 1.3170 1.3100 1.3056 1.2985 US Dollar Index 79.84 79.49 79.30 78.94 78.75Subscribe Click to subscribe to this newsletter. Receive it daily to your inbox!
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Pimco's Gross: Central Bank Credit Policy Provides Liquidity but Does Not Address Solvency; Should Start with Greece and Extend to Rest of EuroZone
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