MidSession Review: A world where hope trumps reality.

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Today's Greece is back in the spotlight.

On one side we have European politicians who prized Mr Draghi plan that brought down yields in Southern European countries.

On the other side we have Greece's creditors that are still at loggerheads, citing the Wall Street Journal article, over how to tackle the country's debt crisis, with the International Monetary Fund threatening to stop its financing unless the euro zone accepts debt restructuring worth tens of billions of euros to bring the country's debt to a sustainable level, people with direct knowledge of the matter said Tuesday.

The WSJ reported that one person with knowledge of the matter said:

There is still no consensus among the creditors. While it's becoming increasingly apparent that Greece's debt is widely off track, nobody wants to accept a write-down.

These words lead us to think that the process of hiding the “dust” under the carpet is not properly working, let's just make few points here:

  • The Greek problem was given as fixed, does it look like fixed?
  • Applying the Maradona theory, the ECB has not done anything at the moment other than threatening to intervene sending Southern European bonds lower.

The question is: why is the Euro Stoxx trading 20% higher since Draghi's “whatever it takes” speech in London in late July?

The answer is that we are currently in a world where hope trumps reality.

Market's players saw the dust in the European morning session, reason why the Stoxx50 traded 0.26% lower to 2,489.51, and in the regional benchmark space the German Dax fell 0.48% to 7,256.14 while in Southern Europe the Spanish Ibex fell 0.93% leading losers to 7,817.30. The Italian Ftsemib, beyond all expectations, rose 0.09% to 15,575.39.

ECB President Mr Draghi added his weight to the growth concerns sparkled by the World Bank yesterday and by the IMF today, saying:

Some things have improved in the last to two or three months, but I think the road ahead is still long and it's uphill.

The lack of progress on the Spanish and on the Greek front weighted on the common currency which traded 0.34% lower to 1.2939$ versus the greenback, and on the Spanish 10-year yields which were up 5 bps at 5.78%.

At the same time the deterioration of the situation in Syria and warning from Turkish President Abdullah Gul that the worst case scenarios between his country and Syria are now playing out, sent Brent futures 0.39% higher to 89.750$ a barrel. While the rising dollar weighted on the precious metal performance: Gold for December delivery traded 0.12% lower to 1,773.6$ an ounce.

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With no major US economic reports expected for today, the news coming from Europe will rule the afternoon session. The main event for the US markets will be Alcoa earnings, due after the closing bell. Since Alcoa makes products used by the construction industry, auto makers and home appliance manufacturers, the company is seen as a barometer to measure the health of global manufacturing.

The aluminum maker unofficially kicks off another earnings season.

When the newstape rules it's important to stake with your plan and to follow your strategy. Remember we do not react to news we plan our trades and we execute them.

Have a great afternoon.

 

 

Originally posted at www.77sigmatrading.com

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