I would sum up the investors’ mindset for Asia, Europe and the US with the following words; pessimistic, confused and frustrating.
Why?
Asia – Most (but not all) of the time while US has triple digit gains, Asia trends the other way. Asia closed in a sea of red today!
Europe – Vultures flying around Greece and then towards Italy. Lots of noises in Greece/Italy regarding Premiership! Finally, the Greece PM has been named! Much more optimistic than yesterday with Italian bond yield lower than 7% because of (suspicion that) ECB is buying Italian bond auctions, and the naming of the Greek PM!
U.S.A. From the man himself – frustrating growth!
Where the markets should be heading?
Reinforcing my previous post, global markets should have seen the bottom prior to Oct 4th 2011. From the largest economy, the US is harvesting better Q3 GDP at 2.5%. From the 2nd largest economy, China is in control (so far) on inflation as the CPI had dipped lower than 6%. Higher imports from the 2nd largest economy with the US and Europe had risen.
Coupled with Emerging markets support for growth rather than combating inflation, Brazil Australia, Indonesia, etc had shaved off 25-50 basis point cut in their latest MPMs.
The 'frustrating' noise hindering a rally in global markets is the investors concern with the EZ playing ping-pong between Greece and Italy. While the (new) Greece PM issue out of the way, and the lowering of Italian bond yields below the psychological point of 7%, major benchmark indices (at point of writing) in Europe is above the flat line while US futures are showing a rally.
Updated Friday, 1201 am. Italian 10 year bond yields are getting shaky again trying to test the 7% level again. Europe and US markets had paired gains.
Updated Friday 755 am. At the close, the Italian Govt. bonds close at 6.886. A relief for the day. Similarly, all three benchmark indices closed higher for the day almost 1% while the Nasday closed up 0.13%.
Rumors from unknown sources that the EZ is speeding up with the literature on leverage of the EFSF and bank recapitalization is supporting ‘risk on’ from an oversold Wednesday.
I am still pretty optimistic with a Q4 and Santa Claus rally to the end of the year!
Euro is pretty supported by China. Look at the Euro/Usd currency pair and it is obvious there is strong support at 1.3600. Earlier part of this year, China has also declared that they would be supporting Euro and there have been many news of China investing overseas. We believe these are the work of China Sovereign Wealth Fund (SWF).
ReplyDeleteOn the other hand, I believe the US wants a weaker dollar.
ReplyDeleteImo, the long term trend for the US dollar is south with intervals of US dollar strength when the US dollar is regarded as a safe haven.