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 13 luglio 2012

Market Comment - July 13

(Marco Bonelli) Sell the rumor, buy the news or buy the rumor, sell the news?

China's economic data in line to slightly weaker than expected, all well discussed and therefore no surprises; JPM's Q2 report slightly weaker, well discussed and no surprise; WFC's Q2 report in line with expectations, well discussed and also no surprise!

Have a happy Friday 13th and trade well!

P.S. Here are just a few more details to the main comment from above:

China's GDP, industrial production and retail sales show a deteriorating trend for several quarters and the only positive market participants can get out of it is that they can shout the word "stimulus" even louder, although the central planning committee doesn't need any advice as they probably already work on the design for the GDP number for Q3 and G4.

JPM's numbers were the expected messy number compilation: Weak investment banking results; better traditional banking (business loan, commercial banking, mortgage etc.) although net interest income declined y-o-y; another huge release from the loan-loss reserves; a 16% year-over-year decline in total revenues; projection of higher expenses and no resumption of share buy-backs before Q4. Even financially engineered earnings didn't make expectations, bottom line, rather disappointing and the only positive is that this messy quarter is over!

WFC, slightly cleaner, also a release from the reserves, also expect higher expenses; expect better revenue momentum which they need as total loans only grew $8.7Bln or 1.1% from Q1 levels.

We all know about earnings revisions to the downside by now. The financial sector saw the highest revisions to the downside of all industry sectors for the last nine weeks and despite massive releases from loan-loss reserves and other accounting gimmicks JPM misses and WFC just makes the numbers...? That doesn't work!

Most market participants go into this earnings season modestly positive, saying that earnings estimates have been sharply reduced and actual earnings may beat. Will this be enough in a decelerating trend? Does it beating Q2 earnings matter when Q3, Q4, 2012 and 2013 estimates got most likely guided down? Is it even fair to apply the same pattern (reduce estimates, earnings beat equals positive surprise) that worked during the last three years of above average earnings growth?

So much for earnings as today's headlines (China, earnings) probably get the initial stamp of "it's not that bad", just to align it with the recent market behavior of intraday reversals to the upside (yesterday it was industrials and consumer stocks that lead the rebound). These reversals and the market closing "way off the lows" even leave the perception of strength and resilience. The SPX also defended its 50day MA (1333.40), the line it flirted with for three days. Except the Russell 2000, all other major indexes closed below the equivalent levels, still, small and mid-caps continue to underperform. The overall trading remains very nervous; various short-term levels in the SPX get picked as support and resistance and short-covering dominates any move to the upside.

The preliminary Michigan Consumer Confidence disappointed badly: not only was it reported well below consensus estimates, positive events that fell into the survey (like the market rally in June and positive news out of Europe) surprisingly didn't lead to any better reading - but even that is not that bad, as the Fed is expected to introduce old and new tools rather sooner than later.

Let's enjoy the seeming strength and resilience of the market, relax on the weekend and get ready for the real earnings season, starting next week!

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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