Currencies  |  February 12, 2013 13:12:30

End risk-on/risk-off

Wall Street without changes circumference in tears

Yesterday's trading on the U.S. stock market was very quiet and the SP500 index recorded a minimum loss of 0.1%. Who on Wall Street are nothing interesting nedialo, circumference was again under pressure. Spanish stocks due to the continued Vax-holm premiere Rajoya with bribes fell by 1.13%, while Italian stocks again displeased growth preferences, Berlusconi and the Italian FTSE / MIB was down 0.61%. Such political turbulence also sent bond prices down peripherals, so stocks of these countries had more reason to decline.

Correlations in the stock market are falling

Yesterday we saw a decline in U.S. stocks on dips peripherals, but this development is not inhabited typical.According to the bank, Societe Generale fell correlation between the 2073 shares in the FTSE All-World Developed Index in December to the lowest level since 2007. Rise of júnových maxima at the correlations reached to 31%, which is the strongest decline since at least 1993. While stocks last years ovplyvňovali matters as the Greek crisis, for panic in the eurozone or fiscal cliff and global stocks are moving around a lot on these underlying trends, nearly identical, up to date again, we see the return stockpicker market, that is a market where necessary to search for good stocks, since I can tie grow even in a situation in which indices are falling.

Correlation between equity title and decreases, but compared with predošlými period is still higher.The attached chart from JP Morragn shows that, while in the 90s, the average correlations U.S. shares only about 20%, about ten years later it was already 30% and now when the correlation to 5-yearly minimách, still achieves a relatively high level 40%.

When in the year 2011, the correlation to 70%, quite often they talked about the bubble and see that she spľasla. A further decrease correlations but neočakávame. Fundamentals globally as developments in the euro area, monetary war, The Chinese slowdown in the U.S. and debt problems will continue to affect all stocks equally and probably will stay close to your current level of correlation.

Drop correlations reveals itself also to the reduction of daily volatility of the stock market. While in 2008, the average daily change in U.S. shares at 1.74% last year fell to 0.59% for January and up to 0.42%. This is the lowest average daily changes since 1993.

End risk-on/risk-off

A similar decrease correlations seen also on the FX market. Analysts warn him to Barclays. Chart correlation between the currencies of the G-10 countries in the dollar hovers at the lowest level since of 2008. This means that more than the main makrotrendy affecting exchange their own individual factors. Pound concerns about further QE and exit from the EU, the euro area again helps to improve the situation on the financial markets, only weakens due to Abe's tendency to halt deflation, the Brazilian Central Bank intervenes again against strong currency. This means that the known approach risk-on/risk-off ends already on the market.This meant that in the case of more positive sentiment weakened dollar and equities and commodities has risen and vice versa in the case of uncertainty in other Asian currencies and failed to acquire the shares at the expense of bonds. After a long time so it could begin to flourish even Hedge Funds, which run on the FX market.

G-7: Leave it to the market

The trend of increased activity in the FX market is likely to continue to persist. Today he gave the green light to the Joint Statement of G-7 countries, which published the British central bank BoE. The report states: We, the finance ministers and central bankers G-7 countries, confirms its interest in the market determined exchange rates movements and will consult on the FX market.We still want our fiscal and monetary policy remained focused on achieving our own domestic goals through our tools, and we will in fact tend conversion rates. We agree that excess volatility and disorderly movements in the market have negative effects on the economy and financial stability. We will continue to consult and cooperate in the exchange rates as it will be needed. Keep it simple: let everyone does what he wants, but let necieli any specific level of the FX market. It probably was zamierené Japan to less talked about where he sees the Japanese yen.

View on today

Euro now broke above the 1.3430, the near term outlook is amended to growth in the euro. The best signálom for further growth but it was the conclusion above that level on your daily chart. Then open it up to the room for growth in your daily graph to 1.3580.Today we expect flax Draghi comments after a meeting with the Spanish politicians. It is possible that you will be through a declining inflationary pressures seek to withdraw euro down again, you are not the bulls are kept on the market.

Author: John Benaki | TRIM Broker, as | Trading on exchanges TRIM Broker

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