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 28 giugno 2012

Market Comment - June 28

(Marco Bonelli) A matter of pretend and a matter of trust!

Why pretend? Well, how sound and sustainable can any kind of rally be that is based on talking yourself into one event after the other (that eventually turns out to be a non-event) while the floor underneath is steadily melting? Many market participants talked themselves into a make-believe state that central banks will launch aggressive coordinated interventions and that the Fed will announce another QE a couple of weeks ago. Now many market participants hope that the European Summit will produce something substantial although expectations are admittedly fairly low. Although one (make-believe) headline this morning stated that "Germany is willing to negotiate on Eurobonds", looking at the pattern of the past 15 or 20 summits, it's highly unlikely that anything gets decided over the next two days, particularly due to the fact that the severity of the situation in 2012 exceeds the level from last year. Greece wants to negotiate the existing bailout and probably needs another one, Spain and Cyprus asked for a bail-out, Slovenia is standing in line and Italy started bailing out one of its banks - smells like things are close to spinning out of control, doesn't it?

Overall there is too much focus on certain events and too little focus on the underlying trend!

Why trust? How much trust deserve banks at the moment when Barclays tried to manipulate the LIBOR market and when JPM's trading losses might surprisingly turn out to be more than four times the initial estimate? Beside that, financial results are one of the most discussed topics ahead of the earnings reporting season. Over the past five weeks, earnings estimates for the financial sector in general got revised to the downside the most of all industries. Shrinking net-interest margins, 31% lower investment banking revenues compared to last year (and the lowest since 1Q09), little M&A activity, sharply lower trading revenues and a stock market sell-off in May are all factors that don't bode well for banks and brokers in particular.

Seemingly unnoticed, macro-economic trends continue to slip. Yesterday's Durable Goods Orders failed to meaningfully offset the declines in the prior three months (and the core number didn't show any growth for more than six months), weekly jobless claims disappoint again, Q1 personal consumption (as part of the GDP report) gets revised down and it's unlikely that Chicago's PMI tomorrow along with personal income and spending for May will show any departure from the deteriorating trend that already started in March and clearly accelerated in May. Beside that economic data out of Europe continues to confirm the same trend.

The low-volume bounce yesterday gave those major indexes that trade above their 200day MA a little breather but the same trend-lines could get closer attention if the early futures indication translates into more selling later or over the next days. The 200day MA for the Dow Jones runs at 12371.75, at 1298 for the SPX, at 2790.75 for the Nasdaq Composite, at 762.87 for the Russell 2000 and at 5006 for the Dow Jones Transportation (the S&P 400 and Value Line Index continue to trade below the relevant levels). In addition, the 2007 and 2011 highs in the Nasdaq Composite remain critical level, 2861.50 in 2007 and 2887.75 in 2011!

The best advice today probably is, to not read too much into any rumors and headlines coming out of Brussels! While no substantial results won't be perceived as a big negative as expectations are very low, anticipation or hope for any improvement in current fundamental trends face resistance from every little disappointing data.

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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