Expectations were set very low going into yesterday’s meeting of Eurozone finance ministers and rightly so, with no agreement and nothing in sight. The next move is a higher level summit organised for Monday. The ECB also meets again today to discuss the solvency of the banking sector, with talk on the periphery of potentials issues arising next week. We’ve already seen substantial deposit outflows, with the doors being kept open by the (increasing) provision of emergency liquidity assistance (ELA). The reaction of the single currency could best be described as indifferent, coming off a little during the Asia session against the backdrop of a slightly firmer dollar.
The Bank of Japan meeting overnight was fairly routine in terms of policy initiatives, with an 8-1 vote for keeping things as they are. There were some changes to their framework, such as moving to 8 policy meetings a year, as we have in the U.S, as the ECB has taken on and the UK are also set to follow. It’s likely that we are going to see headlines surrounding Greece and the potential fall-out, especially in the banking sector, dominate today’s trading. We’ve also seen the Shanghai Composite come off from the recent highs, now down 11% from the peak. This is adding to the more cautious trading environment overall, with the reversal from the recent highs seen in both US and the Eurozone. That said, we are seeing peripheral bond markets (Spain, Italy) widen out against Germany, as a reflection of the concerns surrounding Greece.