Morning Meeting 11/09/12

Good Morning.

As key events from US and Europe approach investors in Asia pocketed some of their gains.

Japan's Nikkei Stock Average dropped 0.78% to 8,800.64, In China, the Shanghai Composite Index fell 0.91% to 2,115.39, while Hong Kong's Hang Seng Index traded 0.62% lower to 19,702.45.

Japanese exporters with strong exposure to Europe were hit as the euro fell back below the psychologically 100-yen level today, the common currency traded at 99.8750 Yen. The euro exchanged hands at 1.2770$ or 0.09% higher versus the greenback this morning; as long as expectations of quantitative easing by the Fed are kept alive, the euro is likely to have some support.

The Kospi Index inched lower 0.24% to 1,920.02 as South Korea announced an incremental stimulus package yesterday to nurse its export-driven economy through prolonged hard times, a move many Asian governments are expected to follow as Europe slides towards recession and the United States struggles to grow.

Risk from news headlines are high in Europe, as Germany's constitutional court is due to rule on the legality of the euro zone's permanent rescue fund Wednesday, and Eurogroup finance ministers are due to gather Friday.

Germany's constitutional decision centers on challenges to the country's participation in the 500 billion euro European Stability Mechanism, or ESM. Critics charge that the treaty behind the ESM robs Germany's parliament of its constitutional authority over the country's budget and have asked for an injunction to prevent the country's president from signing it into law. Therefore Wednesday's decision won't mark the court's final ruling but it should indicate whether the ESM will go ahead.

To increase investors' nervousness yesterday a Bavarian lawmaker asked the court to delay the ruling in the wake of last week's European Central Bank announcement, news reports said, noting that the court is expected to say Tuesday how it will proceed. German Chancellor Angela Merkel's spokesman on Monday told reporters the government was “convinced” the ESM is constitutional and that it expects the court to agree, the Associated Press reported.

US Crude eased 0.2 percent to $96.34 a barrel while Brent inched down 0.1 percent to $114.69 a barrel. Spot gold added 0.3 percent at $1,730.54 an ounce, below a six-month high of $1,741.30 touched on Friday.

After a sleepy Monday during regular session, investors will keep the pace on the cash side with the news headline that sent US benchmarks lower. Wall Street shares, as a matter of fact, accelerated their decline late in the Monday session after Spain's Prime Minister Mariano Rajoy said his government was still mulling its options for a bailout, and expected the EU to set “reasonable” conditions if the debt-strapped country sought regional aid.

Will investors, searching to reload their guns, offer any support? or will they decide, before this two “hot” days, to cash in part of their gains?

For sure we need to be very prudent, FED's and Chinese's puts are still there.

Have a great day.

Originally posted at www.77sigmatrading.com