MORNING BRIEFING: The markets await today’s meeting of European Heads of State

[RTFX-Trading]

MORNING BRIEFING:  The markets await today’s meeting of European Heads of State

What’s new:
Euro Zone: Wednesday, video conference of European Finance Ministers
Euro Zone: liquidity problems of Greece exaggerated, according to Moody's
United States: Removing cash before raising rates, said Mr. Bernanke
London: BoE published forecasts for growth and inflation
Paris: Greece will do everything to reduce its deficits, said Mr. Papandreou

Today:


Rates in Asia and Indices:
EURUSD: 1.3801 - 1.3731.
USDCHF: 1.0681 - 1.0627.
EURUSD: 1.5661 - 1.5588.
EURJPY: 124.16 - 123.51.
USDJPY: 90.14 - 89.82.
DowJones: 10'0038.38 -0.20%
NASDAQ: 2'1447.87 -0.14%
S & P 500: 1'068.13 -0.22%
Nikkei: closed
Shanghai: 2'985.39 +0.10%
Gold: $ 1'080.35
Crude Oil: $ 72.62

Comments:

The Finance Ministers of the 16 countries of the Euro zone participated on a video conference on Wednesday, to discuss the possibilities of aid for Greece. Their proposals will be debated this afternoon at the meeting of heads of European states, held in Brussels, with the participation of Mr. Trichet, head of the European Central Bank. Among the alternatives: bilateral aid from Germany and France, these 2 countries would be in the forefront, which seems to be the most likely, as Italy and Spain, two other strong economies of the Euro Zone are also themselves in a difficult position.

After lowering its rating of Greece in late December, the obligations of the Greek State going down from A1 to A2, the US rating agency Moody's, by the mouth of one of its senior analyst, said the Greece’s liquidity problems are greatly exaggerated and the risk of failure of the country is very low ...

Despite the postponement of Mr. Bernanke's testimony before Congress, his declaration published by the Fed's has provided support to the US yesterday afternoon. The markets are anticipating (wrongly?)  a more aggressive policy of rate from the Fed than from its European counterparts, the ECB and the BoE. Yet the chairman of the Federal Reserve specifically stated that before the Fed raises interest rates, it could first remove liquidity from the market, thereby initiating the dismantling of exceptional measures to support the economy. He also added that the high unemployment, inflation low and stable inflation expectations should ensure very low rates for an extended period.

The publication of the Bank of England's growth forecasts and inflation did not give much hope to see the Central Bank raising its rates by a quarter of a point to 0.75% before the fourth quarter. Compared to the expectations of economists who had forecast a level of 1% by the end of the year, these estimates add further pressure on the Pound, main looser of Wednesday afternoon, but regaining some ground against USD and JPY this morning in Asia.

In Paris, en route to Brussels, the Greek Prime Minister Mr. Papandreou reiterated that his government remained determined to implement its austerity program and reduce its deficits, which really does not reinsure the market. The EUR remained under pressure yesterday, when taking a little color this morning in Asia in anticipation of statements of support to Greece from members of the Euro zone.

Good day

Pascal Bovay

RTFX Ltd
Trading desk
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