Morning Meeting: Asian Tensions

Good Morning.

Asian stocks mostly fell this morning, as a dispute between China and Japan drained investor confidence.

China's Shanghai Composite dropped 0.64% to 2,065.26, Australia's S&P/ASX 200 index fell 0.1%to 4,402.1 and Hong Kong's Hang Seng Index declined 0.1% to 20,644.59. Japan's Nikkei Stock Average slipped 0.1% to 9,146.40  as trading resumed after a holiday Monday.

The Sino-Japan tensions were draining confidence in Asia. Japanese protests pressured select major exporters in Tokyo trading on Tuesday, as reports indicated some further closures at Japanese factories in China on Tuesday. Concerns about the growth slowdown in China  also weighed on sentiment as investors took profits from last week's rallies.

On the currency side: the yen traded at 78.59 to the dollar, off a one-week low of 78.93 touched on Monday. The Fed's move undermined the dollar and lifted the yen to a seven-month high of 77.13 on Thursday.  The dollar index measured against a basket of key currencies stayed near Friday's 6-1/2 month low of 78.601. The euro eased 0.1 percent to $1.3102, slipping from a 4-1/2 month high of $1.31729 hit on Monday.

In the commodity space: Oil rose, with U.S. crude oil futures and Brent futures both up 0.4 percent to $96.97 a barrel and $114.20 respectively. A sudden slide in oil on Monday triggered selling across commodities, although the cause of the drop was unclear. Copper fell 0.2 percent to $8,285 a metric ton. Spot gold fell 0.2 percent to $1,756.64 an ounce, below a 6-1/2-month high of $1,777.51 hit on Friday.

The European session ahead will only have a single Macro event, but a key one, as German Zew economic sentiment is due at 09.00 GMT, the number is expected at -19 versus -25.5 at previous reading. In the Eurozone sovereign debt front, Spain will auction 12/18 month bills, and Greece will try to sell 13 week T-bills.

It's quite important to observe that yields on 10-year Spanish bonds rose back above 6 percent on Monday amid uncertainty over if and when Madrid will formally seek financial aid needed to trigger European Central Bank bond buying.

With the ECB's and FED's bazookas already armed investors are now waiting for silver bullets to be fired. Markets world wide rose in the anticipation of the move, let's have a look at some numbers:

The MSCI Asia Pacific Index rose more than 8 percent this year through yesterday compared with a 16 percent gain on the S&P500 and a 12 percent advance for the Stoxx Europe 600 Index amid speculation central banks will step up measures to promote global economic growth. The Asian benchmark traded at 12.8 times estimated earnings compared with 14.1 for the S&P 500 and 12.2 for the Stoxx Europe 600 Index.

Cash is ready on the side line to be invested in Europe, will it be the day to put money to work???

In my opinion it will work as a barrier when speculators will try to push the Spanish government to seek a full bailout.

Have a great day.

Sources: Bloomberg, Reuters News, Market Watch, The Wall Street Journal, Benzinga, FXpro

Originally posted at www.77sigmatrading.com