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 17 maggio 2012

Market Comment - May 17

(Marco Bonelli) Did / does the lack of confidence become a self-fulfilling prophecy?

Back in March everybody was desperately waiting for a short-term correction as three month of straight rise in stock prices frightened a lot of market players. Now, everybody desperately waits for a technical rebound as nine or ten days of declining stock prices frightens a lot of investors again! Sentiment plays funny games...

It's a fair point to expect some kind of rebound after a weak performance for two weeks, especially when you consider a few economic numbers that eventually surprise on the upside (better Housing Starts and Industrial Production for April with the highest capacity utilization since April 2008) and a few better than expected earnings here and there, isn't it? In "normal" times this combination would have easily triggered some kind of rally but the numbing concentration on Greece and every single related news headline overshadows every bit of positive news on the landscape.

The situation in Greece, the fear of contagion, the future of the Euro and the state of the European economy clearly represent serious uncertainties (and German Chancellor Merkel's statement that she's open to renegotiate probably adds to the uncertainties than having the opposite effect) but it's not clear if the almost fanatical focus on these points is an escape for investors to at least believe in something and an excuse for inactivity and bad performance (in both cases, market participants talk themselves into it and usually get stuck in their minds) or if Greece is just another word for "uncertainty in general", which stands for all conflicting developments in the world: A mixed message from the Fed (FOMC minutes), mixed economic numbers (are some better than expected economic numbers for April just a snap-back from weak March numbers in a deteriorating trend, are they more a result of special factors like weather and seasonal adjustments or do they confirm a recovery in the process?), mixed earnings in the last inning of the Q1 reporting season with ongoing revisions to the downside for Q2 estimates, mixed results from the retail sector including unsurprisingly disappointing April sales; the list goes on...

Uncertainties lifted the US Dollar back to levels from middle of January and the highest levels since September 2010, which put a lot of additional pressure on commodities, an asset class that is already discounting a global economic slowdown much more than stocks. This may also be the explanation for the weakness in gold, which usually takes the role of a safe haven in times of uncertainty. Despite the occasional occurrence of the QE3 discussion, the way commodities trade in particular shows that QE is not on the front-burner of discussions as the so-called greater "transparency" of the Fed's views and intentions actually turned into less clarity and the nearing election makes dramatic changes of monetary policy unlikely unless the fundamental picture changes considerably.

So why does the market not rebound? What's wrong with the technology sector? What's wrong with AAPL (that trades more than $20 below the levels where the stock traded before the company reported another record quarter)? The Morgan Stanley Tech Index and hardware sub-sector broke their 100day MA; the semiconductor and disc-drive sub-sector broke their 200day MA. The technology sector tried to rally three times this week and failed three times and the steady relative underperformance continues.

Back to the general question why the market doesn't rebound: Maybe the horrifying reading of the May Philadelphia Fed Index gives the answer with weakness across all sub-components - maybe a symbol for the deteriorating fundamental picture.

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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