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 1 dicembre 2011

Market Comment - December 1

(Marco Bonelli) So there is liquidity and there is liquidity, right?

First of all, yesterday's events couldn't have been a better end-of the month window-dressing gift as all components were positive, some surprisingly, some as expected but it was the ultimate package: central bank action around the world and a number of great upside surprises in the domestic economic calendar (including a moderately positive Beige Book report) - a perfect confirmation of the post-Thanksgiving/pre-Santa-Clause excitement and a happy ending for a very difficult trading month. Basic Materials and energy lead the rally the third consecutive day, many major indexes broke again out of the August-September trading range, the Dow Jones and NDX broke again above their 200day MA and the Nasdaq Composite broke the critical 2600 level.


Having said that, the liquidity argument might not be as exciting as the media made it believe and the recent positive headlines on the economic front lead to quite erratic sentiment swings and change of expectations that run the risk to confuse short-term and long-term trends where expectations rise sharply and run well ahead of reality.

"...central banks globally announce action to boost liquidity..." Yes, central banks lowered the borrowing cost for an existing Dollar swap and made it easier and cheaper for financial institutions to get some short-term Dollar financing. Yes, the action takes away some tension in the short-term inter-bank credit market that obviously was close to being frozen. And yes, the coordinated "action" is positive, although it falls more into the description "symbolic ". This is an important point: Central banks don't flush the global financial system with liquidity as the Fed and the Treasury Department did with QE and TARP. Central banks remain on the passive side and arguments that yesterday's announcement was a forced reaction to developments in the European financial system (which is rumored to have been in even worse condition than feared) and deteriorating fundamental trends overall, are probably not too far off. So central banks simply reassured that they provide emergency financing if needed, something, which was already in place and doesn't change the overall situation as a more active approach would have done. Therefore the liquidity argument seems to be misleading and partially wrong. Interestingly, bond yields, spreads and CDS levels only came down slightly and didn't participate in the overall excitement in the stock market yesterday.

The erratic swings in sentiment are a little bit worrisome. And I am not even talking about investor's sentiment which almost seems to be a lagging indicator in this current environment of forecasting a trend consisting of one Million unknown variables and no history as a guide. Looking at the latest consumer confidence and PMI readings (November Chicago PMI), expectation levels appear to move from one extreme to the next within a matter of a few weeks. While a positive surprise of any economic statistic is great, any current "improvement" of economic sentiment indicators may come more from simply expecting an improvement once you think that a difficult situation is broadly known and has been discussed in length than from any improvement of the situation itself. It becomes risky when expectations (from managers or investors) get elevated too far too fast and managers and investors then realize that the fundamental situation only improved slightly, didn't improve at all or even kept on getting worse.

PMI Indexes around the world keep on falling deeper into contracting territory, November retail same-store sales were a big mixed bag with even a few prominent disappointments (expectations after Thanksgiving versus reality) and weekly jobless claims reclaimed the 400k mark. The November payroll data tomorrow has better to come in with a strong number that even exceeds the erratically raised estimates since the November ADP Employment Change data exceeded expectations, otherwise the stock market will go back to the usual routine rather sooner than later. There are now two gaps waiting to get closed on the downside in the Nasdaq and the August-September trading range is not too far away ...

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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