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 28 agosto 2012

Market Comment - August 28

(Marco Bonelli) It's been called the "most hated" and the "ugliest" rally in a long time...

...that sounds like the rally from the lows beginning of June didn't only occur against all odds but also against all interest, hopes and wishes, which...doesn't really sound right, does it?

§  Weakening economic data in China, Europe and the US are fine because central banks stand ready to apply more monetary policy tools to stimulate economic growth, something they have done for more than two years and didn't work, but this time (with the global economy in a down draft - unlike the last two years) it will certainly work.

§  Did anybody care too much about Jackson Hole five years ago and further back? The Fed's annual symposium in Jackson Hole, Wyoming has traditionally been used to cover broad themes instead of being associated with specific policy events. So only because Ben Bernanke laid the ground-work for QE2 in his speech two years ago, Jackson Hole became the synonym for QE measure announcements for the next 100 years and a lot of market participants are proud of being able to spell Jackson Hole backwards in their dreams for the last few weeks.

§  Before I get distracted again, the Fed will most probably (if not certainly) implement QE3 at the next FOMC meeting September 13 and whoever was in doubt, the Fed Minutes from last week cannot be wrong and gave the strongest signal, right?

So does all that sound like market players didn't want the summer rally to happen and really worked hard against it?

Against all odds, negative sentiment (which has never been as negative as it was broadly described) improved considerably, especially in the past two weeks; market strategists raised their SPX forecasts, newsletter writers and individual investors show more bulls than bears the first time in months, traders and portfolio managers started participating and general comments and reports also suggest that the "most hated" and "ugliest" rally got slowly embraced - at  the end, 12.15% year-to-date performance in the SPX and almost 18% in the Nasdaq Composite is more an event to celebrate than being miserable about.

Strangely, however, the market environment didn't really change at all: Despite briefly tapping into new-high territory on August 21, most major indexes remain at the top of their higher-highs/higher-lows trend channel but beside the Dow Jones, SPX and NDX, no other index came close to breaking out to new highs (the NDX is the only index that broke out of the trend channel, gratitude to AAPL!); all that with trading volumes reach new lows and market breath deteriorated since middle of July. More importantly, global economic data don't show any real signs of stabilization as one or two better than expected numbers represent more a counter reaction to four or five negative numbers that get followed by new multi-month low statistics in the upcoming month (and new weakness shows in areas like service that held up fairly well up until recently). Although the almost finished Q2 earnings season with a slightly better than expected 1.74% growth number, estimates for Q3 earnings continue getting revised down (now at -1.9% and -5.4% growth excluding financials).

Any deeper analysis in the current optimistic and complacent environment is probably misplaced as this week in particular is pretty much dominated by external events: Hurricane Isaac, the Republican National Convention, the last week of August, summer and vacation ahead of a three-day weekend and of course Friday's desperately awaited Jackson Hole speech by Ben Bernanke.

We might not have seen the last attempt to break out to new highs in this trader's rally (don't forget, it's the "most hated" and "ugliest"!) but the medium-term outlook for the next few weeks and months is not very promising at all!

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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