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 23 luglio 2012

Market Comment - July 23

(Marco Bonelli) Investors can't talk themselves out of the process...

Economic developments are usually defined by trends and the change of a trend is usually (any shocks or drastic events aside) a developing process! Furthermore, any monetary or fiscal policy change in response to that takes some time to take hold and is a developing process!


The European crisis started unfolding almost three years ago; each implementation of austerity measures in a weak economy also takes some time to show but almost automatically leads to acceleration of the deterioration process before any kind of positive development is seen down the road; the dramatic growth in emerging economies like China, India and Brazil started slowing end of last year but it takes some time to finally show in lower revenue growth and it takes even longer to trickle down to the bottom-line. Revenue growth hasn't been great in Q1 and even Q4 last year but it took until now for market participants to recognize the sharp slow-down - mostly driven by the fact that the first focus is usually on earnings that grew strong until Q4 and even surprised solidly to the upside in Q1.

Bottom-line, the process of slowing economic growth globally probably started in the second half of last year and started accelerating in Q1 this year. The process of investors recognizing the fundamental picture apparently started end of Q1, beginning of Q2 and this Q2 earning reporting season with its dismal Q3 outlook marks the first time, that the market talks and worries about earnings and revenue growth - even this is a developing process!

Not surprisingly, the trading rally from last week lacked any kind of conviction and substance (each indicator like total volume, up/down volume, market breadth, new high/low etc.). Early earnings beats and corresponding higher stock prices gave up one third to half of the gains on Friday with banks leading the pack on the downside - a rather troubling development and bad indicator for the overall market. All major averages that managed to break above their 100day MA broke again below and now challenge the 50day and 200day MA on the way down. In addition the Nasdaq also played some gaps as the NDX closed its gap between 2645.34 and 2625.87, which send a reminder that the rally from June 6 still left a gap open between 2504.05 and 2487.50. Finally the Dow Jones Transportation Index officially closed below support of a triangle formation and only has the March lows at 5029.41 left as support before it might target the lows from beginning of June.

The next two weeks until August 3rd will be very crucial and the market might see a major re-evaluation during that time!
Market players will continue to watch earnings and it wouldn't be surprising if the traditional mood change in the middle of the reporting season already occurred after the first week. One of the most anticipated reports will certainly be AAPL tomorrow. There will be a number of important macro-economic statistics, climaxing with the non-farm payrolls and labor report on August 3rd and the FOMC meeting falls right in the middle where an announcement of QE3 is almost consensus expectation. Lacking any positive surprises and the Fed refraining from committing to further bond purchases at the upcoming meeting, the year-to-date performance of the SPX runs the risk of turning negative rather sooner than later.

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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