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

lunedì 29 agosto 2011

Market Comment - August 29

(Marco Bonelli) Did Ben Bernanke save the market on Friday or did the market save Ben Bernanke?

After a string of downbeat statements from Fed officials and the FOMC, the Fed Chairman asserted on Friday that the long term fundamentals for the US economy haven't changed and although it "might take a while" but the Fed expects return to growth and lower unemployment - this was the first description of the US economy using "positive" words in a while. That definitely got investors a bit excited.

Subsequent to a lot of negative perception but also criticism in regard of a possible QE3 event and acknowledgements from a few Fed governors that QE2 didn't help economic growth, maybe the confirmation that QE3 is not imminently on the monetary policy horizon was good news. Beside that it could also express that the Fed is not gravely concerned of another recession (although I would be cautious with an interpretation like this after the Fed misread the economy a few times in the past four years).

Interpretations and comments on Ben Bernanke's Jackson Hole speech are endless and it's always funny to watch the "Let's-find-a-feasible-but-not-totally-common-explanation-why-the-market-went-higher"-game but the version of reading a QE3-announcement into the September FOMC meeting due to the announcement that one extra day gets added to the regular 1-day meeting is quite absurd.

As so often, psychology played a big role in Friday's impressive intraday reversal. The fact that a sell-off following a widely expected non-announcement of QE3 was widely expected, took the steam out of the playbook selloff within a few minutes. This coupled with a market picture that stabilized on Wednesday, followed by some decent but not extremely broad-based profit-taking that erased less than half of the previous gains, probably acted as a good base for Friday's 3.2% rally in the Dow (from its intraday lows), 3.7% rally in the SPX and 4% rally in the Nasdaq Composite. The Dow Jones successfully defended the 11000 level while the SPX accomplished something similar with the 1150 mark, all helped by technology that was once again the leading sector, followed by energy, industrials and consumers.

The more important question is in regard of this week's outlook and the focus will clearly be on a number of macro-economic numbers and the discussion whether the US and global economy is sliding into a recession or the current "soft patch" gets extended by another month will fill each trading day. The most important data will be the August ADP Employment Change on Thursday and of course the official labor report with payroll change and unemployment rate for August. While the August ISM Manufacturing Index on Thursday is also important, after various catastrophic regional indexes, nobody will be really surprised if broad expectations of a reading below 50 materialize. This leads to the two employment statistics and also there, regional data suggests another disappointing report.

The big question is how much negative is already expected! Unless stocks rally sharply in the upcoming days going into the reports (which raises the probability of profit-taking later this week, no matter what), there could be a chance that any kind of selling as a result of disappointing data will be limited or might not occur at all. Needless to say that better than expected data will cause a positive reaction and massive short-covering in a relief reaction that will reignite hopes that the economy will avoid sliding into a recession.

Bottom-line, current market sentiment could be characterized as approximately two thirds of investors being confused or uncertain and the remaining one third strongly divided between bulls and bears. This picture could support a continuation of the rebound for a few more days going into the labor reports at the end of the week, but as usual, we have to treat the market on a day-by-day approach.

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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