MidSession Review 23/08/12

European shares pared early gains to turn flat in the morning session, as initial boost from FOMC meeting minutes release gave way to concerns over the outlook for the Eurozone.

Stoxx50 traded 0.19% higher to 2,457.46, the German Dax rose 0.27% to 7,036.61. Both benchmark indexes were below intraday highs reached on the opening. It looks like traders are starting to move on the side of caution by selling the rallies to book profits.

The German GDP(YoY) came in line with analyst expectations at 0.5%, the Manufacturing PMI beat expectations, the reading was 45.1 versus 43.4 expected. The Service Sector PMI instead fell 48.3 versus 50 expected showing contraction. European macros followed German footsteps with Manufacturing PMI beating expectations (the reading was 45.3 versus  44.2 expected) and Service PMI falling short ( Euro service PMI number was 47.5 versus  47.7 expected). The PMI suggested the eurozone looked destined for its second recession in three years, with Germany now seen as a part of the Euro domino, losing its preferred status.

To cool down investors' expectation of an easy up-day: German Finance Minister Wolfgang Schaeuble sounded a stern note.”More time is not a solution to the problems,” Schaeuble told German radio, addressing Samaras' hopes that his country might be given four years instead of two to push through painful economic reforms, to alleviate the impact on the Greek people. Schaeuble warned that more time could also mean “more money” and added that Europe's help for Greece had already “gone to the limits of what is economically viable”. Reuters reports.

Merkel herself poured cold water on hopes for far-reaching concessions saying that she was “going into these talks with the awareness that we have to achieve that every partner sticks to his commitments”. Reuters reports.

Merkel receives Samaras on Friday and Hollande receives him on Saturday.

By the way European leaders agreed that any decisions on Greece will depend on a report next month on its progress by the “troika” as reported by Jean-Claude Juncker, head of the Eurogroup of euro zone finance ministers, who said Greece was staring at its “last chance” to avoid bankruptcy. A decision to grant more time would depend on the findings of the troika. ”As far as the immediate future is concerned the ball is in the Greek court,” he said  ”In fact this is the last chance and Greek citizens have to know this.” Reuters reports.

The common currency rose versus the greenback 0.21% to 1.2555$, but the real move as we highlighted in the morning meeting was in the precious metal, Gold traded 1.18% higher at 1,659.80 an ounce.

At this point in time we are asking: will US macroeconomic data be able to give steam to this summer rally? Or do benchmarks price already have factored in new central bank stimulus measures???

Let's the market answer the question.

Originally posted at www.77sigmatrading.com