Morning Meeting 05/09/12

Good Morning.

Asian shares hit five week lows this morning as investors get nervous ahead of a pivotal European Central Bank meeting on Thursday and US payroll data on Friday.

MSCI's broadest index of Asia Pacific shares outside Japan tumbled 1% today to a five weeks low, wiping out all the gains built through the summer on comments in early August by ECB President Matio Draghi that bolstered hopes for decisive action to deal with the three-year-long euro zone debt crisis.

The euro slipped 0.2 percent but traded within recent ranges at $1.2540, while the dollar inched up 0.1 percent against the yen to 78.45 yen. The Australian dollar hit a fresh six-week low around $1.0190, hit by the economic slowdown in China, the world's second-largest and Australia's largest export market.

Japan's Nikkei stock average slid 0.62% to 8,721.19 a four week low. Weakness for the euro hit some blue chip exporters in Tokio. Sony Corp dropped 2.70% and Panasonic traded 2.43% lower, while Renesas Electronics Corp lost 2.63%. On the wake of US automakers that turned in their best August since before the 2007-09 recession: Toyota Motor Corp fell 0.16% following a 46% rise in US sales for August, while Honda Motor Co. shares edged up 0.08%. But Nissan Motor Co. dropped 1.50% despite an 8% rise in US sales and Mitsubishi Motors Corp fell 1.43%.

Worries of an extended world economic slowdown have increased investors attention to the Asian-cause with Chinese economy risking to implode and the world's largest debt burden country i.e. Japan limited to supply fiscal stimulus due to a deadlocked parliament investors are driving investors to question the effectiveness of a new money rain.

The Nikkei 225 Volatility Index gained 1.9 percent to 20.48, indicating traders expect a swing of about 5.9 percent on the benchmark gauge over the next 30 days.

Hong Kong's Hang Seng Index dropped 1.13% to 19,211.25 and China's Shanghai Composite declined 0.12% to 2,041.23.  Resources shares weighted on Asian benchmarks amid declining commodity prices and growing concerns about the strength of the  global economy. Steel futures in Shanghai sank to an all-time low of 3,255 yuan on Wednesday while iron ore dipped below $87 a metric ton on Tuesday to its lowest since October 2009.

From China, the HSBC services sector Purchasing Managers' Index fell to 52.0 in August from 53.1 in July for its slowest pace of growth in a year, following gloomy manufacturing polls released earlier in the week.

Growing expectations for more accommodative monetary policy boosted the appeal of gold as a hedge against future inflation risks. Spot gold eased 0.1 percent to $1,692.29 an ounce, off a six-month high of $1,698.45 reached on Tuesday.

Oil was mixed, with US crude  up 0.1 percent to $95.38 a barrel while Brent fell 0.2 percent to $113.98.

Delivery time is approaching in Europe, tomorrow is the D-day,  will Draghi show his cards?? Investors expect the bank to outline its bond buying program aimed at driving down the yields of highly indebted Southern European countries; some expect the ECB to offer a detailed plan based on the idea that lack of details can increase markets nervousness .

Markets' nervousness can be measured looking at the front month volatility, which was well bid over recent sessions. Term structure on the DJ Eurostoxx50 volatility is now markedly inverted  at the front with Sept12 trading above Oct12, and Oct12 trading above Nov12.

It's now time to work on our trading plan, have a great day.

Originally posted at www.77sigmatrading.com