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

martedì 11 ottobre 2011

Market Comment - October 11

(Marco Bonelli) So does a handful of slightly better than expected macro-data that tamed some recession fears and a couple of slightly optimistic headlines from Europe, including the famous "plan for a plan" that all resulted in a 10 to 13% short-covering rally from new lows five days ago change anything?


Unless the fundamental macro trends get reversed (recession or slow growth over the next few quarters) and Europe miraculously fixes all structural issues, the latest news is nothing more than a bit of noise. This is certainly good for some wild swings around the reality levels as expectations flip-flop from one extreme to the next (best example is some sentiment data that dropped to all-time-low levels following the events from August, while macro-data also deteriorated but didn't fall off a cliff) but it doesn't change the macro trends.

A marginally better ISM Manufacturing Index for September (where various sub-components suggest further slowing) and 103k Nonfarm Payrolls for September (that probably included a large part of the 45k Verizon workers returning from strike) doesn't give any evidence that the US economy will avoid sliding into a recession, not even talking about an acceleration of growth. In Europe, looking at Dexia's collapse in Belgium and Austria's Erste Bank's write downs of their CDS and sovereign debt exposure, just shows a small fraction of what's going on once you lift the carpet (unfortunately the "plan for a plan" is just another -although more decisive- move to keep the carpet in place).

The next fundamental development will be Q3 earnings season, which gets kicked off tonight with AA reporting. While the actual earnings reports usually don't matter too much, the direction of stock prices gets mostly determined how high or low expectations are in regard of actual earnings but also the outlook for the quarter ahead. In the past weeks, GDP growth estimates have been reduced substantially but while there was a lot of "fine-tuning" for company earnings estimates, expectations didn't come down a lot (contrary to some comments that state the opposite). The biggest revisions to the downside occurred in the financial and basic material sector, so looking at financials in particular, expectations might have come down to a level where the chance that actual earnings exceed expectations and will therefore be a positive for the stocks is greater than the other way round. Beyond that estimates didn't come down a lot: At the end of August Q3 earnings growth (ex financials) was estimated to be 14.8%, last week it was still estimated to be 14.1% (according to Bloomberg data) - not a great revision given the change in the macro environment. That leaves the question if expectations already adjusted to the slow-growth global macro environment or if they are still too high. Let's put it this way: The risk for disappointments regarding Q3 earnings or Q4 outlook is high!

However you look at it, the market still faces major uncertainties that will continue to produce negative headlines. Right now, the negative headlines took a little break, but an investor sentiment that desperately and forcefully calls for the bottom in stock prices every time the negative news take a break and lead to a rally that produces more than an average yearly return in a few trading days, should be taken with a grain of salt!

While the market may have come closer to the real bottom last Tuesday, it continues to be a bottom-building process and while some better than expected earnings reports in the early stage of the season may extend the "too-far-too-fast" relief rally, chances are that investors will get another opportunity to accumulate positions at levels from beginning of last week or even lower.

Trade well.


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

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