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 15 giugno 2012

Market Comment - June 15

(Marco Bonelli) Could the market face a string of non-events next week?

The intensity grows; rumors fly (as there is nothing else to offer); speculation becomes unbearable and expectations (that the world will look different by the end of next week) rise to new highs. (Unfortunately) most of these expectations are based on some kind of stimulus, ideally a massive coordinated global central-bank intervention - according to a rumor that lifted markets in the last 60 minutes yesterday.

As rumors and discussed scenarios become more and more fabricated, there might be a good chance that nothing happens in the next days. So there is a fair possibility that...

§  ...the Greek election doesn't produce a clear majority and a functional government and although the general commitment to stay in the Euro zone persists (so the "Grexit" scenario will not happen on Monday!), everything else remains uncertain.

§  ...there won't be any coordinated central bank intervention as there is no drastic event that requires any immediate action.

§  ...there won't be any "emergency" G-7 Meeting next week during the annual G-20 Meeting on June 18/19 in Mexico. Of course the G-20 Meeting won't produce anything else but vague statements.

§  ...the Fed will stay on hold and do nothing at the FOMC meeting on June 19/20 as the members don't see any immediate urgency to open Ben Bernanke's tool box and decide to keep their powder dry.

In May, the stock market gave up 10-15% (SPX down 10.5%, Russell 2000 down 12%) after rallying 30-50% between October and March (SPX up 32.5%, Russell 2000 up 41%) and already recovered a few percent from the lows beginning of June. If you listen to the media and read some comments you might think the major averages trade in a nightmare zone while they are in fact off just a few percent from the highs in April and May. Given that and on back of the weakening fundamental picture, the current stabilization in the stock market without gaining too much ground after a multi-week downtrend is rather disappointing and points more towards a simply consolidation within the downtrend (even more when you take into account the lack of leadership - telcos, energy, retail and healthcare were the best performing sectors yesterday, technology and small- and midcaps in general were underperforming). Since the stock market worked off its oversold levels and general investor's sentiment also departed the extreme bearish camp in the past week (both II-Newsletter sentiment and the weekly AAII survey show bullish sentiment rising), the averages are probably more vulnerable to negative or non-events as described above.

In context of the underperforming technology sector, it is also worth pointing out that the Nasdaq still has a small open gap from the June 6 rally that (ideally) needs to be closed at one point: The Nasdaq Composite shows the gap between 2781.97 and 2796.23, the NDX between 2492.50 and 2504 - a mere 1.5% downside from here.

Before we all hold our breath ahead of the elections in Greece and Egypt (not to forget the escalating situation in Syria), here are possible reasons why the Fed won't announce QE3, Twist2 or any other accommodative measure: 1.) they might want to hold off until they really need it; 2.) the US economic situation is not bad enough (some trends are not clear, are contradictive or still show moderate growth, in addition, weak economic data -including the collapsing Empire Manufacturing Index from June- hasn't changed the broad assessment and the growth outlook, yet); 3.) although the Fed doesn't like to hear it and doesn't officially admit it, evidence is pretty clear that QE1, QE2 and Operation Twist didn't help boost economic growth a lot, if at all; 4.) ahead of the November election, any kind of central bank action is a tactical game timing-wise and launching something next week might be the wrong timing.

Each intraday rebound this week was build on stimulus-related rumors - it's needless to say how the market probably reacts if next week in fact turns out to be a week of non-events!

Trade well and enjoy your summer 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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