Up until the Greek presidential vote made headline news, the biggest event of the day was not the full-blown bubble levitation in the Shanghai Composite which rose another 0.33% to a fresh 4 year high of 3,168 on expectations the recent PBOC targeted intervention will transform into a full blown rate cut, but the sudden drop in the USDJPY and its first derivative, the Nikkei stock index, which turned negative on Monday after the health ministry announced a suspected case of the deadly Ebola virus, spooking investors but boosting health-related shares. A man who returned to Japan from Sierra Leone on Dec. 23 was suspected of contracting Ebola, the Ministry of Health, Labour and Welfare said. Test results are expected by Tuesday morning. If confirmed, it would be the first case positive diagnosis in Asia.
As a result, the Nikkei benchmark fell 0.5 percent to close at 17,729.84 points, wiping out early gains inspired by last week's strong Wall Street performance. Even so, the Nikkei is on track for a yearly rise of almost 9 percent (in Yen terms, it is quite negative if expressed in USD) as the weak yen and aggressive asset buying by the Bank of Japan have helped offset the country's disappointing economic performance.
But it was the result of the third and final presidential vote, which came 12 Yes votes short of the 180 threshold to elect a Greek president, that has sent Greek risk assets reeling and has spilled over into European stocks. Even US-based algos appear to have noticed and for some inexplicable reason futures are not of their now mandatory Green color.
As noted earlier, following the failed vote Greek banks are cratering, with many entering a bear market as of the last price update, such as Eurobank Ergasias -23%, Piraeus Bank -21%, National Bank of Greece down 18%, Alpha Bank 17% lower. While in the past this would have been enough to send European shares limit down and peripheral bonds bidless, algos have forgotten their programmed kneejerk reaction since Greece has been off the front page for so long. As a result, Europe is down but not nearly where it would have been had today's vote taken place a couple of years ago. Then again, with the USDJPY far more important than what Greece may or may not do, all that will take for the Santa rally to resume, if only in the US, is for “someone” to buy a few yards of Dollar-Yen, push the pair to 121, and all shall be well once more.
