The fact that we are days away from New Years eve is evident in reading financial newspapers because it looks like new year’s good proposals have been already made, at least this is the conclusion that I have come to while breathing “the optimism” coming from the articles.
The optimism I’m talking about is reflected into the stock market numbers:
- Asian shares are on the rise, with Japan’s Nikkei busting the 10,000 mark for the first time since April, up 2.4% and HK’s Hang Seng 0.7% higher. The Abe trade continues to be in full force in Japan on BOJ easing hopes and reports that the new coalition government has agreed to pass a hefty fiscal 2012 extra budget that could exceed Yen 10tln.
The yen touched 111.78 per euro, the weakest since Aug. 30, 2011, before trading at 111.69 as of 6:30 a.m. GMT, 0.3 percent below yesterday’s close. Japan’s currency lost 0.2 percent to 84.35 per dollar, after touching 84.48 on Dec. 17, the lowest since April 12 last year on easing hopes and as data today showed the Japan’s trade deficit widened in November.
- Rising optimism that a US fiscal cliff deal is near, continues to lift investors spirits. There were some positive developments with fiscal cliff negotiations, as both President Obama and Speaker Boehner seem to be becoming selectively tolerant of spending cuts and higher taxes, respectively. Boehner also proposed a “Plan B” legislation that would extend the Bush-era tax cuts for incomes under $1m.
- Reduced Eurozone risks in the periphery led the Standard & Poor’s ratings agency to upgraded Greece’s credit grade to a B-, the highest since June 2011, although the bonds are still at junk status. The backing of the Eurozone countries to keep Greece afloat and Athens’ determination to pursue harsh austerity measures in the face of popular rejection has prompted the agency to increase country’s credit worthiness by six notches with a stable outlook. “The stable outlook balances our view of eurozone member states’ determination to support Greece’s Eurozone membership and the Greek government’s commitment to a fiscal and structural adjustment against the economic and political challenges of doing so,” the agency said in a statement.
But the optimism was dimmed as Greece’s government bonds were held at a non-investment grade, which they’ve been since 2010. The euro advanced 0.1 percent to $1.3243 after earlier reaching $1.3256, the most since May 1.
Looking at all three regional stock markets it’s look like the worst is over, we are near year-high in all three of them, do they reflect the fundamentals? Or let’s put in another way Is there too much optimism in the air?
We already know what happens when the only driving force is “the optimism or hope”, therefore the right question is: Is this optimism based on something?
At this point you could easily argue that if S&P rating agency is upgrading Greece “on optimism” why I shouldn’t buy the market based on optimism?
The answer to this question will show you where you are in your trading journey.