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

giovedì 4 ottobre 2012

Market Comment - October 4

(Marco Bonelli) Where is the guidance?

Following the QE3 announcement, the market is still searching for the next anchor for investment decisions, although the asset purchases by the Fed and the subsequent money printing are and probably have to be seen as some kind of guideline, yet, no ultimate protection to the downside. In this context, investors also shouldn't rule out that Ben Bernanke, in his desperate believe of the higher asset prices being the remedy for the all economic problems, could and probably will double and triple down on the initial $40 Billion/month, if he feels that economic data or stock prices don't lead to the anticipated wealth effect.


Naturally the anchor for long-term investment decisions is fundamentals. Shorter term, other factors come into play or the guideline simply gets blurred by fanatical speculation in regard of monetary policy, as it did from June until middle of September. That said fundamentals still have to move back into investors' focus. Global macro-economic data remains mixed with a negative bias, which is probably the main reason why recently slightly better than expected data doesn't fully get embraced (given the multiple expansion in the stock market as a result of the roughly 15% performance in the past four months, the argument is fair that a slight improvement in macro data is probably already reflected somehow and doesn't trigger an enthusiastic "jump-on-the-wagon" reaction). Nevertheless, a few more better than expected economic data in the U.S. (like a maybe better than expected payroll number for September tomorrow) could easily ramp up hopes for a more steady recovery, a process that might already be going on, which is one of the reasons why the market shows a positive consolidation above breakout levels.

Another component is earnings and here something interesting is going on: Almost all comments about the upcoming earnings season are negative. With total growth expected to decline by 2% compared to 3Q11, the majority of market participants expect a disappointing season. The highest negative preannouncement rate since 2001 (4 out of 5, dominated by the technology and consumer discretionary sector), recent high-profile warnings from UPS, NSC, CAT and particularly technology heavyweights like INTC (from September 7) and HPQ (yesterday) only confirm and enforce the negative sentiment towards earnings - a development that could open a window of opportunity:

§  With sentiment so negative, the surprise factor is even greater once earnings get reported above estimates.

§  Even in the worst earnings season, a considerable number of companies beat expectations (the prior reporting season for Q2 was considered quite "bad", still 331 of the S&P 500 companies (66.6%) "beat" estimates - the upcoming season will be no different)

§  Particularly down-guidance in the technology sector (INFA started the second round of warnings in the software space this morning) and a few heavyweight disasters already out of the way, actual earnings might be poised for positive "surprises" (particularly in context of recent reports of higher notebook shipments in September and other reports of stabilization in certain components)

§  Q4 guidance might not be as bad as feared, simply because the year-over-year comparison is more favorable. 4Q11 for the SPX was only reported at $23.53 (a sharp drop from 3Q11 of $24.76). While 10.4% expected growth for 4Q12 may probably be too optimistic, a low single digit growth rate would already represent a positive change in the growth rate, although this is just mathematical nature - in other words, the lack of major warnings for Q4 may also contribute to the positive surprise factor.

Slightly better than expected domestic economic data in combination with the mentioned positive surprise factor once the first Q3 earnings get reported could give the market the anchor it is looking for (at least in the short-term), lead prices higher over the next few weeks and bring the SPX close to all-time high levels.

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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