MidSession Review

The Bank of Japan's move lifted Japanese stocks to four month high and this carried into Europe, on the open all regional benchmarks were positive.

But nervousness was clear in the market place as soon as an article published by the Telegraph gained investors' attention, where the head of Germany's Bundesbank appeared to compare Draghi's bond buying programme with the “devil's work”.

Jens Weidmann said that efforts by central banks to pump money into the economy reminded him of the scene in Faust, when the devil Mephistopheles, “disguised as a fool”, convinces an emperor to issue large amounts of paper money. In Goethe's classic, the money printing solves the kingdom's financial problems but the tale ends badly with rampant inflation. Without specifically mentioning Mario Draghi's bond-buying programme, he said: “If a central bank can potentially create unlimited money from nothing, how can it ensure that money is sufficiently scarce to retain its value?” He added: “Yes, this temptation certainly exists, and many in monetary history have succumbed to it,” Mr Weidmann warned. (Telegraph)

Mr Weidmann remarks anticipated the news reports that the German government not only wants a strict separation of bank supersvision and monetary policy in Europe, but also favors a separate bank-supervision body that would give large countries more votes. Dow Jones Newswires.

As the news crushed the newstape the euro turned 0.27% lower verus the greenback to $1.3011, equity benchmarks followed the same path turning lower, the Stoxx50 fell 0.06% to 2,551.99, the German Dax dropped 0.04% to 7,345.02. In Southern Europe, the Ftsemib led the loosers down 0.17% to 16,049.37, the Spanish Ibex fell 0.10% to 8,049.90.

Yields fell slightly on Italian and Spanish bonds: Spanish government 10 Year bonds yields fell 1.66% to 5.788 after Prime Minister Mariano Rajoy said the government is committed to cutting the budget deficit. The yield on similar-maturity debt was down 0.59% to 5.016.

In the commodity space:

Crude futures reversed and moved lower in European trading hours this morning. The October contract of light-sweet-crude-oil futures lost 58 cents, or 0.6%, to $94.71 a barrel in electronic trade, after sliding $1.33 in the regular New York Mercantile Exchange session Tuesday. Saudi Arabia captured oil investors' attention. The country has offered customers in the U.S., Europe and Asia extra oil supplies to offset rising oil prices, the Financial Times reported, and cited a senior Gulf-based oil official as saying “the current oil price is too high.”

Gold and other precious metals were the greatest beneficiaries of the BoJ's move. Gold for December delivery rose $4.10, or 0.2% to $1,775.30 an ounce levels not seen since late February.

A this point, investors will look at a US Commerce Department report at 1.30 PM GMT which may show builders broke ground on 767,000 houses at an annual rate, up from 746,000 in July, according to the median estimate of 85 economists surveyed by Bloomberg.

Markets are looking for direction today, as traders our job is to wait for the market to give us the signal to load the gun. As we said in the previous posts you need to be really careful when the underlying asset approach the “pin” it could be stuck there for a while due to gamma's effect. We need to remember that Friday is Triple witching day.

Originally posted at www.77sigmatrading.com