Asia Open: Europe Continues To Hamper Sentiment In Asia

We are looking at a negative open for most equity markets throughout Asia, likely caused by the mixed data from the US and Europe overnight. The strong employment data out of the US managed to keep most equity markets in the country in the green but European markets were hit hard by poor bond auctions and renewed fears over the EU banking sector.

Themes:

Data out of the US showed that the private sector added 325K jobs last month, significantly higher than consensus estimates of around 177K. The report highlights the fact that the US is trudging along slowly even though Europe is still embroiled in a debt crisis. Nevertheless, given the fact that the correlation between these figures and payrolls data is negligible we expect that traders are waiting for the release of the payrolls figures at 8:30 EST for confirmation of an improving jobs situation.

The news out of Europe is becoming fairly bleak. Poor bond auctions in France and Hungry and a struggling banking sector have combined to create an air of negative risk sentiment in the region.
Reports have suggested that Greece’s PM Papademos stated that his country could default on its debt and possibly exit the euro if the country can’t implement the economic reforms that are needed for the country to receive its next tranche of bailout funds.

The lack of headline data being released during the session and the anticipation surrounding the release of payrolls data could keep the FX market fairly range bound. Nevertheless, the twitchy nature of the market and its sensitiveness to any news out of Europe could prove to be slightly detrimental for risk assets.