Il Primo Ministro greco Lucas Papademos riceve l'approvazione del governo su tagli al bilancio che corrispondono al 7% del Pil nei prossimi tre anni e su una ristrutturazione finalizzata a ridurre di €100 mld gli oltre €200 mld di debito detenuto dai creditori privati, atteso il voto del parlamento • Standard & Poor's declassa il merito creditizio di 34 banche italiane tra cui UniCredit a BBB+ da A, Intesa Sanpaolo a BBB+ da A e Banca Monte dei Paschi di Siena a BBB da BBB+, S&P anticipa "una redditività decisamente debole per le banche italiane nei prossimi anni" • La produzione industriale italiana aumenta a dicembre +1,4% da novembre +0,3%, oltre le stime degli economisti +0,5%, anche se i dati del quarto trimestre -2,1% suggeriscono che la terza economia della zona euro è entrata nella seconda recessione dal 2009 • I Btp decennali salgono per la quinta settimana consecutiva, il periodo di recupero più lungo in oltre cinque anni, la prossima settimana il Tesoro vende €4 mld di buoni al 6% con scadenza 2014 • L'euro cala dal massimo di due mesi contro il dollaro, il mercato azionario europeo cala dal massimo di sei settimane e l'azionario Usa registra la prima settimana di perdite del 2012 dopo che i ministri delle finanze europee non hanno concesso il pacchetto di aiuto necessario a prevenire il collasso economico della Grecia

mercoledì 17 agosto 2011

Market Comment - August 17

(Marco Bonelli) At the end of the day, a busy day but a string of non-events!


Non-event Nr. 1:
Of course the spotlight was on Paris, although realistically, nothing substantial could have been expected from the highly publicized meeting between the French and German leaders. Unfortunately it came even worse and was a classic demonstration of what most politicians around the world do best: If there's a problem, let's create a new commission of "experts" (Eurozone Economic Council) and let them investigate and "monitor" the situation. Then let's deny that there is a wide-ranging problem and release some incorrect statements ("bail-out fund is big enough"). Additionally, let's point fingers ("Eurobond could hurt healthiest countries") but in order for them to be able to say that they took care of the situation (without taking on any responsibility), let's make some small (but ineffective and therefore highly questionable) proposals (introduction of "financial transaction tax") and on top of all that, let's talk intelligently and come up with a few hollow comments ("...ambitious joint proposals...", "...determined to strengthen the Euro...").

Non-event Nr. 2:
On the macro-economic front, investors got presented a mixed picture: Another confirmation that economic growth in Europe is struggling badly, US housing starts and building permits for July more or less in line with expectations at historic low levels and surprisingly better than expected US industrial production and capacity utilization for July, which was mostly driven by higher motor vehicle and electric utility production, though.

Non-event Nr. 3:
The market picture didn't change too much: Recovery from the lows, recovery after the intraday sell-off that followed the press conference in Paris and a little bit of selling in the last 15 minutes - some light profit-taking, some light short-selling, but all on mediocre volume. Interesting also, that the market internals showed a complete opposite to the day before, thanks to the help of another round of mostly favorable quarterly reports from retailers, WMT and HD on the forefront: Yesterday the consumer sector lead the market and was also the only sector in the SPX in positive territory while it was the worst performer on Monday. On the contrary, financials and energy, the two sectors that lead the rally on Monday, were the biggest losers yesterday.

A couple more mentions from the earnings front:

After hours DELL didn't confirm the message the market received from CSCO last week. Although Q2 earnings, margins and even guidance for operating income was better than expected, the company missed revenue estimates and guided revenues for the year sharply down, confirming the average message most companies in the tech sector sent in the current earnings reporting season. To round up the picture, ADI reported and guided negatively, too. Going forward, HPQ will report tomorrow night as well as PMTC, the first software firm to report after the quadruple fear events (recession, Europe, rating downgrade and market-crash).

The more interesting story is happening in the retail sector, where most companies beat EPS and revenue estimates and often guide the next quarter higher, which is quite surprising.  All of the companies reported a quarter that ended in July, so if consumer behavior was affected by the recent events and the stock market decline, we are talking a few days that didn't break a positive quarter. As consumer confidence from early August plunged to a 20-year low, it remains to be seen how the current quarter really shapes up or if the positive guidance is more wishful thinking in regard of a robust back-to-school shopping season.

Regarding the market, the described lack of leadership and lower volume is quite normal after the initial rebound in the past few days as a lot of investors are still on the sidelines and the rest tries to figure out the next market direction from current levels. All major indexes fell below the closing levels from Friday August 5 (before the Standard & Poor's downgrade) but remain well above the highs from Tuesday (the FOMC statement). While the rebound could certainly lift prices a few percent higher, the sentiment and overall comments that already seem to lean towards a positive market outlook for the end of the year is worth to be followed. I suspect that the bulls are just more vocal than the bears but if it turns out that the majority of market participants think that the correction is over and the market will regain and exceed the highs from July by the end of the year, the road towards that point might look a bit different. Overall, for long-term investors it's probably worth waiting for lower entry points instead of chasing the market that already caught up around 40% of correction!

P.S. Thank you to all who participated in the survey from last Friday: 45% of all respondents thought that we have seen a bottom and the rebound is for real and 55% thought that we are in a fake rally and the market will probably make lower lows.

Trade well.


(Marco Bonelli is the Managing Director - International for CL King & Associate in New York. The opinions expressed are his own)

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