Risk Assets Suffer
Risk assets came under heavy pressure on Tuesday, in a move which started in Asia but gained momentum later in the European and US sessions. The high-beta risk currencies fell sharply while most major equity markets traded deeply in the red. Sentiment has clearly switched back to a more cautious view, on a combination of factors including Bernanke’s subtle shift in tone last week, reduced China growth forecasts but mainly renewed fears over the outcome of the Greek debt negotiations. The Greek debt agency chief confirmed that the deadline remains March 8 but investors were not particularly consoled by the comments. A PSI deadline delay is certainly plausible if they find that take up is not even large enough to enact the CAC’s, one option would be to go back to parliament and amend the law to get a lower threshold. However, the official line so far remains that the deadline is March 8. Oil prices remain a concern, but they are probably not at levels yet warranted to demand early policy action, or to destabilise growth. They were not immune from the risk sell-off on Tuesday, with Brent falling around $2, and the commodity-linked currencies sold off as a consequence. Overnight EURUSD traded 1.31031-1.3231 and USDJPY traded 80.59-81.59. Ahead today , Q4 GDP data is due for Australia while unemployment data for Switzerland is due later on.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank