The improving job numbers were taken as god news for the markets. What I would pay attention to now is the talks by the EU leaders on an aid package to Greece. The EU will have to make the choices of a slow recovery or less benefits provided by the governments to the people of the county. Both of these factors should keep inflation tame and work into the Vine strategy that the EU will not recover (and as a result raise rates) as fast as the US.
I am looking into the short the EUR trade that is currently in the Vine strategy. I feel that if you have a position on shorting the Euro it would be a good time to take a little off the table. I still believe that the Euro can hit parity if the situation continues to deteriorate (Ireland and Spain) but taking a 10% position off would be a prudent move to take profits and provide more liquidity for other trades.
This week will prove to be a busy one I am sure. While the Healthcare debate is a big factor in the US don’t forget to watch out for the trends of protectionism growing in China and Europe as well. It is the by product of the Export led strategies of some countries and I think it will have much more long term implication on business and commerce than the health care bill as it stands now.
There is speculation that emerging market debt is getting overvalued. This is noted by comparing the spread of the treasury yield to the specific debt. While the bonds could be overvalued, it is important to remember going forward that the US debt problems can also make the spread narrow as well. Could a scenario exist (though no one will want to admit it) where so called emerging debt has a negative spread to the US treasuries?
Baltic Trading Ltd. (BALT) started it debut of trading slightly lower after opening at the bottom end of the IPO range. I think that this is an interesting stock to look at for if/when the Baltic dry index is going to move up again. It has not debt and is going to heavily use the spot market for determining rates. BALT is going to buy ships with the proceeds of the IPO, at lower than historic average costs, and attempt to ride the consolidation of supply that is necessary for the industry to become profitable.
I am feeling bearish on the JPY long term because of the constant talk of government intervention when the USD-JPY pairing drops below 90.00. I think it is good to start a small position now and build up if it drops below the 90-89 level. I can see a long term trend going into the end of the year as the anticipated interest rate hikes in the US come near. At the same time the Japanese govt is talking about more monetary loosening.
CEO of Overseas Shipholding Group said he see a wave of consolidations on the horizon for the industry. I think this plays into the export surges and commodity demand of late. I will look into this further and create an article as I think it is an interesting indicator to follow.
Will the combination of the JPY being a flight to safety trade and the EUR being the reason to go to safety create an exchange rate that will hurt the exports of the Japanese economy as the Euro become a more viable alternative, as well as the proposed tax hikes in Japan hurting domestic demand at the same time.