JPY Gains
Equity markets in the US traded in red on Monday as companies prepared to announce their Q3 earnings starting this week. JPY gained across the board though there was little in the way of major data releases with Tokyo on holiday and the US Treasury market closed for Columbus Day. The Eurogroup meeting on Monday did not result in any decisions on Greece or Spain, that kept EURUSD below the 1.30 level. Eurogroup chief Juncker formally announced the inauguration of the ESM and the appointment of Regling as the Managing Director of the EUR500 bn fund. Regling noted that while the EFSF will continue to fund the remaining parts of the current bailouts, Spanish bank bailout will be funded by the ESM – with disbursements of funds expected to happen in November. Juncker hoped that a decision on Greece could be made in October. Spanish Economy Minister Guindos noted that Spain has undertaken significant reforms as part of its budget plan and he does not see the need for more austerity measures. German Finance Minister Schaeuble reiterated that Spain does not need an assistance programme, continuing the uncertainty of a Spanish bailout and the OMT programme. Spanish yields rose marginally but the bond markets are still benign to put any meaningful pressure on the Spanish government to expedite a request. Our flow indicators showed that EURUSD buyers returned to the market last week, driven by hedge fund flow (which offset real money and corporate sellers), an indication that EUR bulls are not being put off by the persistent resilience of the Spanish government with regards to requesting official aid. Ahead today, the BoJ’s monthly report and Merkel’s meeting with Samaras are due. Also on tap are the speeches from BoJ President Shirakawa, ECB President Draghi and BoE Governor King.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank