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11 Sep 2013
Risk-appetite hits the “on” button
FXstreet.com (Athens)- After a long time of an upheaval trend in risk-appetite assets, markets tend to show that risk sentiment is widely back and might bolster further.
Risk appetite strikes back as the ultimate barometer currencies skyrocket as well as bourses
It is since a long time ago that risk-appetite had disappeared entirely of the trade world. Global turmoil, especially in Eastern Asia, as well as the sluggish Euro zone economy and the sharp downfall of emerging markets have deterred investors from investing in riskier-assets. But things have much changed over the few past weeks; The better tone in risk appetite is clearly visible in stock market indices overnight but there has also been a text book reaction in the FX markets with the traditional “safe-haven” currencies being the poorest performing G10 currencies the recent days. Of the JPY, the CHF and the USD, it is the former which has been hit hardest. On the other end of the scale the NOK, AUD and NZD are all performing good enough, with the “Aussie” the ultimate risk-barometer showing that the uptrend mode might come to stay and boost even more. The AUD has taking its lead from the better Chinese data and the NOK on the back of the general election result which should usher in more fiscal spending which could be met with more rigid monetary conditions. The main bullish-catalyst among others seems to be that the geo-political tensions are fading away. Elaborating on, Russian President Putin approached US President Obama about an international weapons sequester that would see any chemical weapons in Syria’s possession turned over to international authorities, in order to avoid any military strike on behalf of the U.S. What’s more, August Chinese Industrial Production grew faster than expected, i.e. Chinese Industrial output, retail sales and fixed assets investment were released at much higher than expected levels. This helps solidify the sense that the Chinese economy has stabilized, i.e. help calm emerging market fears and massively reduce demand for the Yen."
Furthermore, Kit Juckes from Societe Generale, suggests that “European and Asian equities and ‘risk-on' currencies have all benefitted as the post-payroll asset rally gained momentum. I think the move has a decent chance to last till Christmas. Tapering will be announced next week, the ‘tapering isn't tightening message' will be repeated and policy uncertainty will decrease. The Fed is on hold until the second half of 2015, the ECB for even longer, the Chinese slowdown is having a vacation (thanks to some shadow banking) and it looks as though military action in Syria will be avoided.”
And now what? Will the risk-appetite mood last long?
We see risk-sensitive assets to skyrocket, as well as equity futures along with Japanese crosses. It could be asked for how long this uptrend movement might last? As long as we are stick to currency crosses, we could well say that the AUD/JPY is probably the most suitable cross to show that the uptrend movement has come to set up a strong continuation tone. According to Kit Juckes, Head of FX at Societe Generale, there seems to be few headlines that may disturb the enthusiasm of risk-takers, noting "we have little new on Syria, military action likely, not guaranteed, still not imminent, we have the best UK RICS survey outcome on house prices since 2006, and we have a jump in Australian business confidence. Finally we could add a finishing touch on what depicted above. It is really noteworthy that news wires around the globe suggest that “ the company that is in charge of the Dow Jones, decided to withdraw from the large index (DJIA) 3 stocks, i.e. Bank of America, Alcoa's and Hewlett Packard. The reason for the withdrawal has to do nothing but with their low price. The shares will replace the three is as of Nike, Goldman Sachs and Visa, respectively. This could lead by itself to a Dow Jones surging, because the DJIA is weighted by the share price, and while BAC is at $ 14.48, the Alcoa at $ 8.08 and HP to $ 22.36, whereas on the opposite side are Nike is at $ 65.40, Visa to $ 178.55 and GS at $ 159.49. Even technically, this paves the way to an uptrend momemtum…
Risk appetite strikes back as the ultimate barometer currencies skyrocket as well as bourses
It is since a long time ago that risk-appetite had disappeared entirely of the trade world. Global turmoil, especially in Eastern Asia, as well as the sluggish Euro zone economy and the sharp downfall of emerging markets have deterred investors from investing in riskier-assets. But things have much changed over the few past weeks; The better tone in risk appetite is clearly visible in stock market indices overnight but there has also been a text book reaction in the FX markets with the traditional “safe-haven” currencies being the poorest performing G10 currencies the recent days. Of the JPY, the CHF and the USD, it is the former which has been hit hardest. On the other end of the scale the NOK, AUD and NZD are all performing good enough, with the “Aussie” the ultimate risk-barometer showing that the uptrend mode might come to stay and boost even more. The AUD has taking its lead from the better Chinese data and the NOK on the back of the general election result which should usher in more fiscal spending which could be met with more rigid monetary conditions. The main bullish-catalyst among others seems to be that the geo-political tensions are fading away. Elaborating on, Russian President Putin approached US President Obama about an international weapons sequester that would see any chemical weapons in Syria’s possession turned over to international authorities, in order to avoid any military strike on behalf of the U.S. What’s more, August Chinese Industrial Production grew faster than expected, i.e. Chinese Industrial output, retail sales and fixed assets investment were released at much higher than expected levels. This helps solidify the sense that the Chinese economy has stabilized, i.e. help calm emerging market fears and massively reduce demand for the Yen."
Furthermore, Kit Juckes from Societe Generale, suggests that “European and Asian equities and ‘risk-on' currencies have all benefitted as the post-payroll asset rally gained momentum. I think the move has a decent chance to last till Christmas. Tapering will be announced next week, the ‘tapering isn't tightening message' will be repeated and policy uncertainty will decrease. The Fed is on hold until the second half of 2015, the ECB for even longer, the Chinese slowdown is having a vacation (thanks to some shadow banking) and it looks as though military action in Syria will be avoided.”
And now what? Will the risk-appetite mood last long?
We see risk-sensitive assets to skyrocket, as well as equity futures along with Japanese crosses. It could be asked for how long this uptrend movement might last? As long as we are stick to currency crosses, we could well say that the AUD/JPY is probably the most suitable cross to show that the uptrend movement has come to set up a strong continuation tone. According to Kit Juckes, Head of FX at Societe Generale, there seems to be few headlines that may disturb the enthusiasm of risk-takers, noting "we have little new on Syria, military action likely, not guaranteed, still not imminent, we have the best UK RICS survey outcome on house prices since 2006, and we have a jump in Australian business confidence. Finally we could add a finishing touch on what depicted above. It is really noteworthy that news wires around the globe suggest that “ the company that is in charge of the Dow Jones, decided to withdraw from the large index (DJIA) 3 stocks, i.e. Bank of America, Alcoa's and Hewlett Packard. The reason for the withdrawal has to do nothing but with their low price. The shares will replace the three is as of Nike, Goldman Sachs and Visa, respectively. This could lead by itself to a Dow Jones surging, because the DJIA is weighted by the share price, and while BAC is at $ 14.48, the Alcoa at $ 8.08 and HP to $ 22.36, whereas on the opposite side are Nike is at $ 65.40, Visa to $ 178.55 and GS at $ 159.49. Even technically, this paves the way to an uptrend momemtum…