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

mercoledì 15 agosto 2012

Market Comment - August 15

(Marco Bonelli) Once again, looking at the details, is the rally telling the right story?

During the last days, statements like "...where the flow wants the market to be..." and "...what the market wants..." were heard quite often. As simple as these comments sound, most of the times they are right as liquidity is undoubtedly one of the most important market drivers. Not surprisingly, the liquidity argument became alive again as part of the explanations why the market rallied and acted as resilient as it did this month but basically since the market saw the lows beginning of June.

"Where the flow wants the market to be" also spreads to the technical picture that partly looks interesting and in sectors like technology, housing/construction and energy even encouraging. That said, it's interesting to see the technology sector drop to the second-worst performer during yesterday's last hour sell-off and also financials (the sector remains in the wide trading range that started in 2009 with insurers trading at the upper end, banks in the middle and brokers and diversified financials more at the lower end of that range) drop from being the leader to the upside to the middle-field.

Liquidity and the corresponding technicals can easily carry the market for a while (usually that move gets enforced by mixed sentiment and hesitant investors who finally get forced to participate in an attempt to not fall back any further in performance) but at one point all hopes and expectation have to backed up by fundamentals. For many investors, the stories about weak economic growth, weak demand and recession in Europe (just to name a few) became old and a lot of market participants got tired following the same stories again and again. But here is the problem and the reason why the liquidity argument might have only a limited affect:

There are often comparisons between 2012 and the last years; one of the biggest differences is that the global economy is weakening, that growth in emerging markets is weakening and that China's economic activity is way below levels investors got used to over the last two decades. For the first time in a while, weak growth in one spot cannot be offset by booming growth in the BRICS or other countries. This and the implications of deteriorating growth on a global base (topped by Europe's recession) get under-estimated if not almost ignored. All you hear is comments about single events ("...the xyz index came in above expectations..." or "...the better data signals a brighter outlook ahead..."); nobody really talks about the process, the trend and the interconnectivity of global data. Global economic growth seriously started slowing in Q4 last year. Turning the down-trend around is like the famous example of reversing course for a 150k GT cruise-liner; it simply doesn't happen in a month or two!

Nevertheless, hope dies last and a better payroll number, a couple of better retail spending data gets interpreted as the turning point and artificial excitement gets drained out of slightly better than feared GDP reports from Germany, France and the Netherlands. TGT follows M, KSS and TJX with solid quarterly reports and hopes for a decent back-to-school season stay alive. HD "confirmed" the healthy trend of the housing recovery and hopefully, tomorrow's housing starts do the same. Now it's up to CSCO tonight to pull the rabbit out of the hat and forecast a bright future for IT spending.

Hope and liquidity (or liquidity and hope) keeps the SPX above 1400 and the Nasdaq Composite above 3000, ignores another major disappointment in the Empire Manufacturing Index for August and will be the force behind a possible continuation of the trading rally towards the highs from March/April but it's unlikely that fundamentals are able to keep up with the excitement.

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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