On 1/6/12, Friday, European bond yields continue to rise with the Italy 10-year above 7%, consistent with levels where the bailouts occurred with Greece and Portugal. France 10-year yield is now over 3.4%. Germany 10-year yield dropped under 1.90% as money seeks safety. Unicredit is down 35% in only four days. Europe is in a sour mood after poor German factory data is released. European and U.K. retail sales are weak. LaGarde says the IMF will defend the euro. Sarkozy says that France will charge a fee on financial transactions even if other Euro countries do not. The France banks weaken on the news. The Jobs Report announces a better-than-expected 200K jobs number and 8.5% unemployment rate. The futures react positively but slowly leak lower as analysts realize the jobs created were in construction due to a mild winter, and holiday seasonal help including retail clerks and packaging delivery workers, all not expected to be sustainable employment. Markets also receive some buoyancy due to rumors that China may step in at any time with stimulus. The broad indexes finish the week positively; the SPX is up 20 points for the first week of the new trading year, or 1.6%.
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On 1/9/12, Monday, the Merkozy (Merkel and Sarkozy) meeting is uneventful with the German and France leaders restating their commitment to find solutions. Merkel said financials transaction fees should be Euro wide. Soros says Europe faces a vicious deflation scenario. Markets trade sideways, the SPX moves within a five point range, 1275-1281, all day long.
On 1/10/12, Tuesday, the futures are strongly green all night long as the outlook in China improved with the Shanghai Index gaining 3%. Chinese easing monetary policy will boost commodities. Fitch may cut the sovereign debt ratings of Italy and Spain, and other Euro nations, by one or two notches but said a downgrade of France is not on the table. Of course traders are awaiting S&P’s decision on the France downgrade, one notch probably priced in but not two notches. The broad markets rocket higher from the open and drift sideways. The day ends with the SPX up 11 points, or 0.9%. The Dow Industrials are up 70 points but were up triple digits earlier.
On 1/11/12, Wednesday, Fitch says France needs to refinance a ‘daunting’ amount of debt in 2012 and Italy is the biggest Euro worry and a downgrade is likely. Fitch says the euro disappearing will be cataclysmic.
On 1/12/12, Thursday, Italy and Spain bond auctions occur without problem. The ECB leaves rates unchanged. The retail sales data and jobless claims data in the States, however, is worse than expected. The Farm Report late morning sends grains and most of the soft ags over the cliff, the CRB drops. Broad markets continue a sideways trek thru the week
On 1/13/12, Friday the 13th, JPM earnings match the bottom line but top line revenue falls short ushering in market weakness. News hits that the S&P downgrade of France and other Euro nations is imminent. Markets sell off. Greek negotiations collapse and a pause in the talks occurs. The Greek deadline is 3/20/12 when their money is completely gone. As the day moves along dribs and drabs of news hits and it appears much of the downgrade news was priced into the markets as the broad markets recover into the closing bell. The week finishes with the small caps up almost 2%, tech and the Dow Industrials up about 1.5%, and the SPX up 0.9%, 11 points, to close the week at 1289. The SPX is moving thru a sideways channel 1281-1297.
On 1/13/11, after the close, S&P announces that France was downgraded one notch while Italy and Spain were both downgraded two notches each. S&P says the outlook remains negative moving forward and a 1 in 3 chance remains for further downgrades this year. S&P also cited the failure of the 12/9/11 Summit that proved to be hugely disappointing and helped reinforce the move to downgrade the Euro nations’ debt. Keystone’s target date for the France downgrade announcement hit dead-on today, as forecasted back in December.
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On 1/16/12, Monday, markets are closed in Observance of Dr. Martin Luther King Day holiday.
On 1/17/12, Tuesday, markets reopen after the three-day holiday weekend……….
…………….……the saga continues…………..
Looking ahead,
Watch the European 10-year bond market yields since the S&P downgrades of France, Italy and Spain occurred. Greece’s deal to secure funding by 3/20/12 to avoid default is in jeopardy adding further drama. Use the Italy 7%, Spain 6% and France 3.3%-ish level as a signal of trouble. Thursday is a big auction day so U.S. traders will be up early that morning.
Global recovery is stalling. China real estate bubble is popping.
Earnings Lolapalooza with banks and technology a major focus; C, WFC, EBAY, GS, PNC, STT, USB, AMD, AXP, BAC, BBT, FCS, FCX, GOOG, HBAN, INTC, IBM, ISRG, JCI, MS, PPG, SWKS, LUV, UNP, UNH, GE, SLB, STI.
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On 1/16/12, Bond and Equity Markets are Closed in Observance of Dr. Martin Luther King Day.
On 1/17/12, Empire State Mfg Survey 8:30 AM.
On 1/18/12, PPI 8:30 AM, TIC Data 9 AM, Industrial Production 9:15 AM, Housing Market Index 10 AM.
On 1/19/12, France and Spain Bond Auctions. CPI, Housing Starts and Jobless Claims 8:30 AM. Philly Fed Survey 10 AM. Natty Inventories 10:30 AM. Oil Inventories 11 AM (delayed one day due to the holiday), 10-Year TIPS Auction 1 PM.
On 1/20/12, E.U. Summit, Existing Home Sales 10 AM, OpEx.
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On 1/23/12, Congress returns. Projection for China easing via triple R’s to occur is 1/23/12 thru 2/8/12.
On 1/24/12 and 1/25/12, Fed Rate Decision and Press Conference.
On 1/26/12, Italy Bond Auctions.
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On 1/30/12, Italy and Belgium Bond Auctions.
On 1/31/12, EOM.
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