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 6 dicembre 2011

Market Comment - December 6

(Marco Bonelli) Is the change in perception a short-term, temporary or long-term phenomenon?

The perception towards developments in Europe, towards US economic data, towards profit warnings and the perception towards the financial sector clearly changed over the last week. Did investors just get sick listening to the same old song and they looked for a different tune or did the overall music program change?

Except a small intra-day pull-back, it got pretty much brushed aside that Standard and Poor's put all EMU countries and the EFSF on negative credit watch. Also, it got pretty much ignored that October Factory Orders and the November ISM Non-manufacturing Index was reported well below expectations and represented the first disappointment on the domestic economic front in weeks. The ISM data shows that the service sector survey deteriorated to the lowest level since January 2010; the components with the biggest changes were business activity and inventories up, while employment dropped below the critical 50 mark.

There is no evidence that the music program really changed, as investors hear a number or messages from the past: "'s a make or break week for the European debt crisis...", "...eurozone countries to limit their budgets deficits to 3%..." - didn't we hear all that a few times over the last months and by the way, didn't the "Stability and Growth Pact" from 1997 require a 3% limit for member's budget deficits which was breached by Germany and France many years ago? In other words, hopes are high that meaningful results will come out of the European summit this week but it's pretty clear that the music hasn't changed unless you think that there is more substance to the QE talks in Europe and the United States.

Maybe the market picture clarifies everything a bit more. The major averages saw another intraday reversal to the downside, but similar to Monday's trading, market breadth remained surprisingly strong and positive. While financials, energy and basic materials (the latter two mostly helped by weaker Dollar) lead the performance to the upside, technology clearly lead the rebound in the last 60 minutes yesterday.

Talking industry sectos, investors find a mixed picture: the performance within technology sector is very scattered, the sector overall recovered but remains below a medium-term downtrend; cyclical, materials and energy remain in a trading range, energy stays within its downtrend from April this year (considering the commodity driven sectors in particular and looking at the CRB Index, it shows that prices remain in the medium-term downtrend from the tops end of April - so unless the underlying commodities break out of the downtrend, driven by a weaker Dollar, the upside in basic materials and energy might be limited). The best performing sector within cyclical is the transportation sector that almost trades at new highs. Also at new highs trade retailers and hotels within the consumer sector, while the rest of the sector stays range-bound. Finally financials: the sector got beaten down again to the lows from August and formed a double-bottom formation; however the upside potential is uncertain as the sector faces a downtrend and several resistances within the longer-term range. Overall, the financial and transportation sector are probably the more interesting to follow as a more sustainable strength could have positive implications for the rest of the market.

Having said that, each picture looks different depending which colors you use: high expectations for a solution in the European crisis and mostly disappointing economic data globally are clearly major headwinds for any kind of year-end rally.

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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