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 5 giugno 2012

Market Comment - June 5

(Marco Bonelli) Does a lively discussion make a market or could it be just noise?

Correction territory, negative year-to-date performance, bear-market, lack of volume, lack of panic, orderly retreat, most negative sentiment in two years ...are all part of a lively discussion these days. Is it the peak in bad news? Has the stock-market overreacted to the disappointing payroll data from last week? Is it time to buy now? ...are all questions being asked as part of the discussion.

To avoid any misunderstanding, of course opinions and discussions make the market! The only reason why I brought up the initial question is that all the mentioned keywords obviously cover the peripheral topic of how the market pulled back and not why the market came off its highs.

Have we seen the peak in bad news? This is probably the wrong question and would only be valid if we expected the current events as one-time phenomenon - once the bad news is out, we can move on and concentrate on the positive. The right question should be whether we have seen the end of the trend! The bad economic and political news from around the world the markets currently face is part of a trend and the uncertainties that accompany this trend cannot be measured! Unlike in 2008 and 2009, the global economy, including emerging markets, is sharply slowing today; Greece may have been seen as a small, manageable country (which it isn't), however, with Spain now officially asking for a bail-out from the European Union, Europe is facing a problem with a much greater magnitude (and as European leader didn't and still don't have any plan how to fix Greece, why should anybody believe that any one of the official bureaucrats even knows what's going in Spain). How can all the negative news be discounted in a deteriorating trend with a highly uncertain outcome? It can't, in other words, we haven't seen the peak in bad news, yet!

On top of uncertainties regarding the domestic economy, the stock-price deterioration in May, the unfortunate FB story, the unexpected trading losses at JPM and the wave of negative macro data most likely affected sentiment for consumers and corporations, which will again reflect on future spending decisions etc. Lower passenger unit revenues at airlines, lower total vehicle sales in May, further slowing growth in smart-phone sales are all small hints of a possible domino effect.

The Dow Jones, Dow Jones Transportation, SPX, small- & mid-caps and the Value Line Indexes still trade below their 200day MA, 50day MA already broke or are about to break below the 100day MA for a number of major averages but at the end chart levels also don't give the answer for more clarity on terms of future direction, they are more reacting to the fundamental developments. Having said that, the Nasdaq Composite climbed back above its 200day MA while the NDX never traded below, showing a little bit relative outperformance. If the market prepares some kind of short-term trading rally (and timing is certainly a casino game), the technology sector may be one of the leading groups as the MSH (Morgan Stanley Technology Index) and SOX lost more than 16% in May and now trade closer to the lows from last year than the highs from end of March. You could certainly argue that there is probably a reason for the sharp decline, at the same time many valuations for technology blue-chips appear cheap on paper and traders are just desperate to jump on any rebound in the AAPLs and IBMs (that trade right at their 200day MA by the way) of this world. How long it might last is also part of the casino game but at least short-term traders might want to take a closer look.

The Fed's Beige Book tomorrow, the ECB Meeting and Ben Bernanke's Humphrey Hawkins testimony on Thursday and of course the FOMC meeting on June 19/20 will hopefully give clearer indications about the future trends.

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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