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

lunedì 11 giugno 2012

Market Comment - June 11

(Marco Bonelli) "Now the situation has been resolved", according to Spain's Prime Minister Mariano Rajoy, the same Mariano Rajoy who stated less than two weeks ago that Spain doesn't need a bailout, who refused to acknowledge on Saturday that Spain had been rescued by the European Union (dismissing the issue as a "semantic discussion") because Spain "had earned its credibility" and "the bailout agreement was a sign of confidence in the Spanish government". You wonder in which world some politicians live...

In recent weeks, similarities between 2011 and 2012 often got and still get emphasized. While many of these comments sound like we are dealing with two different events that happen to look similar, it's in fact one event and the fact that how the situation in Greece developed and the market reacted last year looks very similar to how the situation in Spain develops this year and how the market reacts is rather frightening as it shows that leaders have learned nothing (despite the mounting Euro 486B to Greece, Ireland, Portugal and now Spain that got mostly washed down the drain), don't have too much control and still don't have too much of a plan either!

Back to the real (really?) world - as stock markets staged the best week of the year after the worst month of the year, partly on hope of a Spanish bailout, does that mean that the rally can go on back of the "good" news or does it mean profit-taking as the news was already anticipated? With a little pause on Thursday, technology and financials lead this rebound higher so far. At the same time retailers and industrials showed a significant amount of nervous volatility, the former group due to repercussions from the weak payroll data and various earnings warnings (although it's interesting that WMT and HD were among the best Dow performers on Friday, as they were during the decline in May!) and the latter sector torn between global economic worries, questions about China's slow-down and energy prices. While the recent headlines will be good for some short-term moves, investors should keep an eye on the 200day MAs for all major averages (all but the broad Value Line Index now trade again above the relevant levels!) and the highs from 2007 and 2011, where the Nasdaq Composite, S&P 400 Mid-cap and Russell 2000 trade below the highs from these years and the Dow Jones and SPX trade slightly above the downtrend line from the 2007 highs (once again the broad Value Line Index trades within its 5-year downtrend and well below the highs from 2011!).

A few more observations:

Ø  With all eyes on Spain, investors didn't hear anything from Greece (except a rather physical discussion among "politicians" on Greek TV); the remote consensus is that Greece will leave the EMU which will be good for stocks if the exit is "orderly" and bad for stocks if the exit is "disorderly" - either way, central banks will flood the markets with liquidity ... on Sunday, June 17, Greece will have another round of election and this week, discussions and forecasts will pick up in intensity by the day.

Ø  Comments about the rate-cut from the People's Bank of China went from "positive" and the "start of a longer lasting easing cycle" to "ineffective" and "result of a panic reaction" - nevertheless, the PBOC gets credit for acting compared to the ECB and BoE, that only made headlines with smart talking ... CPI, PPI, Industrial Production and retail sales for May were reported within a fraction of expectations while exports and imports grew a lot more than estimates (probably the rate-cut from last week already started supporting growth!)

Ø  All data and comments from Fed officials kind of suggest that the current economic situation does not require any immediate accommodation and that the Fed is only "ready to act" if any of the risks that Ben Bernanke outlined last week (i.e. European crisis, fiscal cliff) get worse - in fact the latest Beige Book shows and many FOMC members even describe the state of the US economy positively ... various macro-economic data this week (retail sales, industrial production from May in particular) and the Empire State Manufacturing Survey as the first June reading of the regional indexes will show if the "moderate growth" description is still appropriate.

Ø  The majority of market comments concentrated more on topics (Ben Bernanke, monetary stimulus, China's rate-cut and economic growth, Spain, Europe) and not on market direction - the bullish commentaries were mostly based on negative sentiment and the few bearish notes mainly point to more negative news from Europe.

As long as fundamentals are in a deteriorating slide, any calls on market sentiment might be short-lived! The short-covering / intraday reversal sequences may go on for a few more days although it's unclear if the reversals mirror a lack of follow-though buying, profit-taking or if it's just a sign of a healthy consolidation. Looking at the reversals in the Euro, commodities and European bonds don't leave the impression of a healthy rally, though...

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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