Thursday equities markets in the US soared triple digits in futures market as the euro — for bizarre reasons — strengthened against the greenback despite the ECB’s cutting Greece’s ability to use its bonds as collateral in future loans.
Bond yields across the continent moved lower with Spanish 10-yr moving astonishing 3%. Greece’s equity market fell 9% on the announcement with bank stocks leading the way.
Overall European bourses were flat to slightly lower. The fact that the Greek central bank still had the ability to tap funds from the ECB’s ELA (emergency liquidity assistance) facility seem to mute further downward pressure on markets.
While the market reaction appears to be confusing, this is where we are now in global markets. Manipulation by central banks in equity futures as well as Forex and bonds can give the appearance that the overall markets approve of the measure.
Yesterday’s US close is a perfect example. As the ECB Greek announce hit at about 3:45pm the equity market had an abrupt reaction of reversing off its gains, but the response was muted as if someone was in buying near the close.
I figure the volume needed to stem the sell trades must have been massive, and only a certain few have access to that type of liquidity or a backstop to that liquidity. So while the NY Fed may not have fingerprints on the trade, its cohorts on other trading desks may be doing their bidding.
Will be interesting to see how US markets end up today.