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

giovedì 3 novembre 2011

Market Comment - November 3

(Marco Bonelli) Welcome to the Casino!

Yesterday it looked like investors are able to use the whole day today to place their bets for a 300 points up or down move on the Dow Jones depending on how the nonfarm payrolls for October get reported. Today the casino activity is already in full swing and investors get offered a variety of bet options which apparently focus once again on the headlines instead of on the underlying fundamental trends.

So what does the ECB rate-cut mean? Was it really a surprise? Will 1.25% interest rates do what rates of 1.5% couldn't do and pull Europe out of the almost inevitable slide into a recession? What does it mean for rates in the European countries? What does it mean for the currency?

What do a possible resignation of Greek's PM Papandreou and a collapse of the government mean? What does it mean when the proposed referendum will be called off? Will the political uncertainty change anything within the country to the better? Does is calm down mounting calls for Greece to exit the currency union?

Beside the inevitable heightened uncertainty (which is never a positive), these open questions are tailored for the complete range of answers and as sentiment became increasingly positive and even optimistic over the course of the rally in October, an unexciting rebound like yesterday and positive interpretations of today's events work perfectly to re-ignite the bullish views and remind investors to buy the dip for the upcoming year-end rally.

As nobody really knows how the headlines develop in a few minutes and few hours from now, not even talking about tomorrow, I'd rather concentrate on the fundamental trends that still don't really support the positive outlook the market currently embraces!
The FOMC statement yesterday sounded slightly more optimistic ("...economic growth strengthened somewhat..."; "...household spending has increased at a somewhat faster pace..."; "...the Committee continues to expect a moderate pace of economic growth...") but it really didn't offer any new optimistic views but only adjusted the description of the already publicized recent and current economic data. Beside that, the Fed also lowered their chronically over-optimistic bi-annual economic outlook (the ECB just indicated they will likely do the same for Europe). Weekly jobless claims dropped slightly, monthly retail same-store-sales came in slightly disappointing, the October ISM Non-Manufacturing Index got reported a bit below expectations and September Factory Orders were slightly better. Does all this change the trend? No!

Back to the original bet: with continued uncertainty about the economic outlook, tomorrow's labor report will be the most important data to watch, regardless of all headlines and positive interpretations to it. Once the dust settles, investors will still place the bets and a 300 points move to the upside or downside tomorrow is definitely possible depending on the data. The tendency to look at the sell-off from Monday and Tuesday as mere consolidation and a great buying-the-dip opportunity leaves the market with a lot more down-side risk if economic numbers continue to disappoint.

The upside might be more limited than investors wish and the downside might be greater than investors think!

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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