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

venerdì 23 marzo 2012

Market Comment - March 23

(Marco Bonelli) Did the Fed already start the tightening process?

No, I'm not referring to various comments from hawkish Fed Governors that suggested interest rate hikes ahead of the ridiculous "end-of-2014"- promise. I'm more referring to a 2.45% (or $66.6Bln) reduction in the Monetary Base since the end of February, which is a substantial decline, especially on the downside.

Sure, it's very difficult to oversee the whole variety of monetary policy action, but the reduction in the amount of money (and commercial banks' reserves) in the economy needs to be monitored because if it's an intentional cutback, the Fed is either jumping on the economic recovery wagon with both feet (instead of only three toes) or is more concerned about inflation than it officially expresses.

In the meantime, every single piece found somewhere in the world that remotely looks like an economic number gets treated as THE indicator for global economic growth in the future, which unsurprisingly leads to a gloomy scenario one day (like yesterday) and a jolly outlook the next day - confusing..., I guess you are not alone! By the way the same thought-process is behind the attempts to explain the wild moves in commodity prices (with the recent weakness, the CRB slipped again below its uptrend from 2009 - whatever it's worth...).

The one sector that does react to both outlook extremes is industrials! These stocks have the highest correlation to good and bad news and were certainly one of the worst performing sectors yesterday. What is maybe different in the most recent downturn of the group is that blue chip-favorites like CAT, BA and UTX also traded sharply lower in the last trading days. CAT and BA broke their October uptrend (MMM already did so beginning of March), CAT and BA also broke their 50day MAs and GE and UTX dropped off resistance levels from spring last year. It's also worth noting that this is the second wave of weakness in industrial / cyclical stocks in a bit more than three weeks. (The first weakness was initiated by the transportation sector in February; yesterday the TRAN dropped again below its 50day MA and could form a double-top at 5400.)

At the same time, even yesterday didn't really feel like (and it wasn't) a heavy selling trading session due to underlying bids in the technology and financial sector. Also many consumer related stocks continued their relative strength and continued their impressive rise (that lifted sub-sectors like general retail, specialty retail to the upper end of a multi-year rising channel). Bullish investor sentiment strongly embraces these sectors and negative or mixed news (earnings etc.) usually gets ignored or interpreted positively and backed up by buying any weakness, if there is any.

Other than that, the market operated pretty much in "no-man's land" this week as market participants only got presented little news. At least the housing sector delivered some data, which were sort of mixed but still confirmed a slow recovery, earnings from KBH were rather disappointing but New Home Sales for February are still coming up and may determine the direction for the rest of the day. The market in a vulnerable stage and the end of the quarter just one week away, investors continue to be too afraid to sell (they may miss another leg to the upside) but also too afraid to buy (they may get embarrassed by the short-term correction that everybody expects).

Trade well, take it easy and have a great weekend.

(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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