Quote of the Day
What lies behind us and what lies before us are tiny matters compared to what lies within us.
Ralph Waldo Emerson
Optimism over the Greek Parliament approving the austerity budget and thus opening the window for the next phase of bailout funds to flow has been providing enough enthusiasm over the last 24 hours to result in a modest short covering rally in just about every risk asset including oil. The market is anticipating a passage of the budget with the vote likely coming sometime between 7 to 10 am EST. Although this is very unpopular among the majority of Greek citizens it is viewed as the path of least resistance insofar of Greece not defaulting on its debt.
With the Greek headwind likely to move to the back burner and with positive manufacturing data out of Japan rising at the fastest rate in about 50 years (as it begins to rebuild its country) market participants are slowly starting to change their sentiment toward the global economy and starting to pick up its pace of recovery and thus a positive for oil prices at the moment. There are still a lot more data points regarding the energy intensive manufacturing sector to be released in the next few days and as such we may still see a lot more volatility before the week is out. But for today we can say that the market is back to a risk on trade mentality and will remain in this pattern until proven differently or until the next batch of less supportive data hits the media airwaves.
On the equity front global equity markets have continued to recover as shown in the EMI Global Equity Index table below. The Index has now gained 1.4% for the week narrowing the year to date loss to 5.3%. Seven of the ten bourses in the Index are still in the negative column for the year with Brazil still holding the bottom spot in the Index. It is still too early to say whether the market has bottomed or what we have seen this week is all short covering and window dressing as the quarter comes to an end. I still think the move so far this week is more a result of short covering and end of quarter window dressing and not yet a structural change in the markets. As such we may see some additional choppy trading as a plethora of important data will be hitting the media airwaves over the next week or so including the always important and market moving US nonfarm payroll numbers to be released a week from Friday. For today equities are a positive for oil prices as well as the broader commodity complex.