Risk aversion dominates investors ahead of Greek election

09.51 AEST, Thursday 14 June 2012

Risk aversion dominates investors ahead of Greek election

By Miguel Audencial (Sales Trader, CMC Markets)

The Australian market is expected to have a lacklustre start due to continuing concerns in Europe and disappointing US Retail Sales data. I would expect a low volume on today’s session with risk aversion dominating the mind set of investors leading up to the Greek election on Sunday.

In Europe, concerns about Sunday’s election are evident as the yield on bonds rise. Investors are demanding more return as more risk and volatility is expected in the region. Even German debt instruments, which can be viewed as a safe haven in the region, are given an added risk premium as their yields also rose last night.

The disappointing US retail sales data also provided more reasons for US equities investors to sell-off. However, the weak Producer Price Index figure reported last night may re-ignite speculation for another round of Quantitative easing from the US Fed.

This increased speculation of QE3 provided a lift on the price of Gold. However, prices of other commodity instruments were weaker across the board as worries over Europe still dominate.

Crude Oil was sold off again with demand concerns over weak US retails sales data and supply issues still lingering as inventories declined less than expected. The upcoming OPEC meeting is unclear whether an agreement would be made about the ideal output level. The outcome of this meeting would be closely watched by oil traders because this would give a very good indication on where the price oil is headed in the short-to-medium term.

US CPI figures and unemployment claims data are due later tonight. Due to the increasing speculation of QE3 low figures may support a boost to the market. However, concerns in Europe and the risk aversion in the Greek election will dominate trading in the next few days.
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