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 marzo 2012

Market Comment - March 6

(Marco Bonelli) Are you confused these days?

Don't worry; nobody will blame you as many contradicting data and developments raise questions about the true state of the economy but also the true state of the market.

The "China cuts its GDP forecast to 7.5%"- headline was the main event yesterday and obviously surprised quite a few market participants (which is kind of surprising). The lower prospects for Chinese economic growth also offset better than expected economic data in the US, at least that's what the initial reaction in the stock market suggests.

It's economic recovery in the US versus slower growth around the globe! Will the US economy pull the global economy out of the mud or will the global economy drag the US economy back into the mud?

The Dollar appreciates, commodities are falling again, interestingly, bonds rose after yesterday's economic releases, only to reverse and sell off again, which makes sense, or is it once again the confirmation of no QE3 announcement, that lead to the initial sell-off in stocks and the delayed sell-off in bonds?

The scenario of recovering US economy, stabilizing European economy and soft-landing in China has been implemented in investor's minds for quite some time, so somehow better than expected data in the US and a few better than expected sentiment figures from the global economic stage appear so normal and leave the impression that this has been the trend and will be the trend going forward, ignoring a fair amount of disappointing data and quite a few signs of weakness.

The favorable rosy scenario that so far ignored any statistics that came in below expectations has probably been one of the key drivers of the many intraday reversals to the upside, similar to yesterday's market that still hasn't seen a substantial down-day this year. While a correction could also materialize as a side-way consolidation (a dozen intraday reversals and the market trading in a tight range for a few weeks also works off its over-bought levels), the underlying scenario doesn't change and the market just takes the infamous breather, waiting for the next catalyst to resume the rally - a view that probably still describes the prevailing sentiment.

The question is if the underlying scenario doesn't change or better, if the underlying scenario has never been what the majority of investors think it is! Economic growth in the US, global economic growth, earnings growth...

Regarding the market, you cannot really ignore developments in a lot of general and sector indexes (outside the Dow Jones and SPX stage) that point towards some kind of topping out process (whether it will be a short-term or longer-term top remains to be seen). Despite yesterday's reversal, the Value Line Index, Dow Jones Transportation Index and Russell 2000 confirmed the recent weakness and the Nasdaq probably showed the worst performance of the year, confirming sub-sectors like semiconductors and internet that already broke short-term up-trends or failed at major resistances, all with ongoing weak market breadth. Beside the obvious basic material and energy sectors that suffer with falling commodity prices, financials (that still looked quite interesting until recently), industrials and technology (both were among the best performers in the past two months) lead the downside for a second day.

Nevertheless, companies in the technology and healthcare sector with a strong growth story that haven't seen a parabolic run yet as well as defensive plays in the consumer sector should be worth buying or holding during this consolidation / correction period - but maybe not this week as long as labor market data could pose as a further risk to the market!

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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