Schäuble thwarts hopes of imminent Greek deal

Thursday, April 16, 2015

Tensions between Germany and Greece showed no signs of curtailing after recent comments from Germany’s finance minister, Wolfgang Schäuble, all but ruled out any deal in the coming week. Eurozone finance ministers who are due to meet in Riga on the 24th were hopeful that an agreement on Greece’s debt could be reached, paving the way for the release of additional bailout funds. However, in what was the first public admission from a senior eurozone official instrumental in the negotiations it seems the talks have ground to a halt. With a €747m payment due to the IMF on May 12th and with eurozone finance minister scheduled to meet again on the 11th May any potential agreement could go down to the wire and could see increased volatility in risk assets.

Asian equity indices rallied higher overnight as the bullish sentiment from both the European and US session’s spilled over to Asian trading. Chinese mainland benchmark indices led the charge higher after encouraging data released overnight offered a bright spot for Chinese investors in an otherwise gloomy outlook after recent data confirmed fears of slower growth. Foreign direct investment accelerated 2.2% y/y in March, outstripping expectations of a 1.3% y/y increase which saw risk appetite improve across the board with three month LME copper prices building on support towards yesterday’s close, pushing back above $6,000/tonne briefly early this morning.

Comments from Premier Li Keqiang offered markets further insight into the tools at policymaker’s disposal as they battle to support growth. In an interview with the FT Mr Keqiang stressed that further devaluation of the Renminbi were not the preferred policy tool and that China could not “rely on devaluing our currency to boost exports”. The comments add further fuel to the argument of additional intervention by the PBOC with the expectation among market participants that the central bank will inject more liquidity into the system while simultaneously cutting the reserve requirement ratio. With a current reserve requirement ratio of 19.5% for major lenders, policymakers still have significant room for manoeuvre compared to their European counterparts and we could see the PBOC significantly step up efforts to support the economy in the coming months.

3-M LME copper prices post late stage recovery yesterday, push higher this morning

LMCADS03 Comdty LME COPPER 3 2015 04 16 07 49 58

China's RRR could come down as policymakers struggle to revive growth

CHRRDEP Index China Required De 2015 04 16 07 46 16

Events for today

1330

US

Mar

Housing starts

1330

US

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Jobless Claims

1530

US

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EIA Nat Gas

Topics: Copper, ECB, EUR, LME, PBOC
More from: Kash Kamal