Market Rout in Asia – more to come?

May 16, 2012

FOREX, Global Macro

I’ve just posted the daily wrap up of today’s trade over at MacroBusiness and I thought it worth sharing my thoughts with you. Here is the link but I wanted to perhaps extrapolate a little on a few thoughts.

Clearly we are seeing a spike in pessimism accompanied be a fall in equities, commodities, growth currencies and bond yields in countries that enjoy market confidence. The corollary is that bond yields in countries that do not enjoy market confidence are actually being pressure much higher and aggressively so.

As you can see in the next chart BHP has been sold heavily today, indeed since the beginning of May so for me what we are seeing is more than just a risk off event – I genuinely thing that we are seeing the rerating of the growth prospects for the developed, but crucially also, the developing world.

The Aussie Dollar is a great bellwether for many things and it has been under pressure since before the Greek election which also speaks to me of this rerating of growth which makes sense given that economic results have been printing to the low side recently. The chart below is of the Citibank economic surprise index versus the Aussie Dollar. Clearly not a perfect correlation but one that helps explain that this is not just about Greece or Spain or even Europe.

Tough times for bulls and we have been preaching capital preservation for some time now – the markets are very negative but i dont think we have seen the pessimistic crescendo that can form a sustainable bottom just yet.

Good Luck – I’ve got my tin hat on.

Have a great day

Gregory McKenna

www.twitter.com/gregorymckenna

Please remember these are not recommendations for you to trade these are my views and I have my risk management tools and risk parameters that you do not have access to. Thus, this blog is for information only and does not constitute advice. Neither Greg McKenna nor Lighthouse Securities has taken your personal circumstances, objectives or financial situation into account. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.

If however you do need advice on Investments, Economics, Funding and Liquidity, Interest Rates and Forex and Derivative markets we are happy to help.

Please Email the team at Lighthouse at info@lighthousesecurities.com.au or Greg directly on greg@lighthousesecurities.com.au

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