Europe concerns drive market positions

14.39 AEST, Thursday 14 June 2012

Europe concerns drive market positions

By David Land (Head of Analysis and Education, CMC Markets)

So much recent market positioning has been a direct reflection of concerns in Europe but it seems as though wider risk markets have entered into a holding pattern that you would expect to remain now until after the weekend. There have been sporadic rallies over the last few days in risk currencies but on a slightly wider view it’s pretty clear that a number of markets are simply in a sideways oscillation. While I think the Greek election is getting a lot of attention and is critical to risk pricing in the immediate future the nature of markets means that future possibilities are now drawing as much, if not more attention.

In the local session today the selling was broad based which is symptomatic of the general disinterest in the share market. I think that investors in many cases are really just tired of seeing the same story of ups and downs in the market so are down to their core portfolios now. For a lot of people the fear driven by Europe is no longer a cause to do anything because they are now positioned for the longer term. For many investors trying to position themselves to benefit from the bounces in the market has been a bridge too far so they will wait until there is more consistency of market direction to be found.

For short-term traders though this market has been great. Particularly those dealing in currency there has been a number of very decent short and mid term trends in the market to benefit from. Of course this group benefits from high volatility which is generally the last thing that investors are looking for.

On a global level there is great dissatisfaction with the way in which Europe has kept its house. There is of course a great divide in economic schools of thought but the idea of fiscal cuts as a means of getting a country out of debt are not getting any real traction in terms of results. The history of the Euro nations so far seems to be to get to the edge of the abyss and then do just enough to take a couple of steps back. Without some change to this doctrine we can assume that trading conditions will remain punctuated by periods of high volatility and low investor confidence in the ability of governments to properly create solutions to the problems.
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