Greek and Chinese equity sell-offs appear worse than they really are, and the ASX futures know it - up 4 points

Here are two ways of describing what happened in Greece last night:

  1. Athens Stock Exchange experiences biggest drop since 1980s!!!
  2. Athens Stock Exchange reverses last three weeks of gains.

They're both factual, but one is naturally more alarming/alarmist than the other. On a similar note, there are some fairly alarming reports of an 8% sell-off on the Shanghai Stock Exchange late in yesterday's session, but that was from top to bottom, on a daily closing basis it was 5.43%. And when was the last time it was at this post-sell-off level? One week ago. The headlines really should be highlighting that certain markets are overcooked, and Europe has certainly been primed for the expectation of broad asset purchases from the European Central Bank next year, so it is not surprising to see trigger fingers a little twitchy in its most vulnerable markets.

I won't go into detail on these two events too much, other than to explain today's first and second charts. In the first chart I've taken a handful of large cap Greek stocks from the Athens Exchange, from the Rivkin Trader platform, which shows traders a more complete picture of what markets did leading up to this 'huge' sell-off. In a similar way that the second chart shows the move in Chinese equities (I've used the MSCI All China ETF) pre and post last night's sell off, all that has happened here is that traders have blown the froth from the top that has accumulated over the past few weeks. They're less liquid and more concentrated exchanges than that of Australia or the US, for example, and these moves are not easily comparable to the effect that would be had on sentiment if it were the S&P 200 or S&P 500. So life goes on.

Lastly a quick sanity check for all of those who might be feeling a bit bogged down by Australia's worsening fiscal picture and the dim news coming from our big buddy China - while the Australian economy needs a lot of work, thankfully we are not kidding ourselves from a 'listed economy' perspective. The chart here shows 2014 year to date moves in the ASX 200 (black line) versus the S&P 500 (orange line) in percentage terms. While we're not naive enough to think because our market hasn't risen dramatically recently that it can't go lower, one can breathe easier in our market than those Greek and Chinese ones illustrated above it, which rose dramatically and in an unsustainable manner, prior to last night's moves.

Chinese producer prices are due out at 12:30pm today Sydney time. It will be interesting to see whether input prices has fallen more than expected (-2.4%), which could spark some optimism given this cooling inflationary environment's ability to allow Chinese policy makers to assist when needed.

Today’s charts are taken from the Rivkin Trader platform. 30,000 global instruments available to trade including FX, commodities, index, ETFs and international shares. Trade Australian share CFDs from just $8 or 0.10%. Click here or phone 1300 748 546 to get your free $100,000 demo account.

Upcoming economic announcements: Westpac consumer confidence at 10:30am (AU), Chinese consumer (exp. 1.6%) and producer prices (exp. -2.4%) 12:30pm, all Sydney time.

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