Home > Uncategorized > 2011/12/13: Quick Post: Apologies & Observations and Weekly Reports & Events Calendar Now Available

2011/12/13: Quick Post: Apologies & Observations and Weekly Reports & Events Calendar Now Available

© 2011 ROHR International, Inc. All International rights reserved.

The full calendar is available through the link in the right hand column. Apologies for this taking until today, but we were called away from the office yesterday afternoon, and have been busy with a critical matter this morning. It seems that LIFFE (London International Financial Futures Exchange) was a bit less than aggressive in alerting the data vendors to the change in the Long Gilt future delivery basis from 6.0% to 4.0%.

We have been busy the last couple of days, and especially this morning consulting with our own very adept data vendor on some final considerations for the timely necessary conversion of the historic data to make it relevant for the new 4.0% basis contracts. This is especially important as the volume has already shifted to the first of these, the March 2012 Gilt future.

This is such a robust week once again, it is impossible to include anything but a fraction of the major influences in an overview. Yet, key aspects will be those that relate to the continuing debt and fiscal reform problems in Europe and a heightened US influence once again.

In addition to that continued sharp influence from the attempts to address the European Sovereign Debt Crisis, there is also going to be quite an impact from important scheduled reports, communication from central banks and bankers that include today’s FOMC decision and statement, and much heavier government debt auctions.

All of which is consistent with the skepticism we have shown for the proposed solution in Europe not being a fiscal union as such, yet rather more so a benightedly pro-cyclical German Austerity Club. And in spite of the degree to which budgets must indeed be balanced across the cycle to restore confidence in European sovereign debt, attempting this in the midst of a significant downturn is not likely to yield the desired result.

Yesterday morning was also the next release of the Organization for Economic Cooperation and Development (OECD) Composite Leading Indicators (CLI.). And what did they have to tell us about the devolution into a more depressed global economy? That Europe is still leading the way down into below trend growth, even if they are slightly less negative on continued weakening elsewhere.

The rest of the report and event flow for the week is once again rife with significant influences in addition to those ad hoc European crisis activities and announcements. In the first instance, there are quite a few European government bond auctions throughout the week with heavy US supply as well.The European Parliament is also debating the EU Summit results today, and there are quite a few other high-level governmental meetings and central bank reports throughout the week.

Actual economic data is also very critical this week, as today saw weak German and Euro-zone ZEW economic surveys and US Advance Retail Sales. Tomorrow is Australian Consumer Confidence and the Chinese Leading Economic Index followed by Euro-zone Industrial Production. In 1962 the movie “The Longest Day” about the Allied D-Day invasion of Europe was released. This Thursday is The Longest Day for economic data releases we can recall in quite some time; it just goes on and on, beginning with the Chinese Manufacturing PMI and similar figures throughout Europe along with the ECB Monthly Bulletin, and so on and so forth into US figures that culminate with the Philadelphia Fed Index.

General Market Observations

It is important to note December S&P 500 future Closed last week back above the 1,240-50 area yet had not been able to knock out the ultimate resistance up at 1,270 during the week. The question now is whether that means it will fail once again back below the critical 1,230 (equivalent to 1,224 in soon-to-be lead contract March future) buffer below it that was tested yesterday.

While the generally upbeat activity in equities on Friday reflected the hope that Europe had finally found a near-term solution to its Sovereign Debt Crisis, on further review the actions were/are distinctly underwhelming. In spite of the improvement in the equities this morning, much remains the same as noted in last Friday’s Rohr Report TrendView MARKET ALERT.

EXTENDED TREND IMPLICATIONS

And that the equities were far more hopeful than other asset classes was already apparent in the activity on Friday. If there was any real indication that the European solution was credible, why in the world did the euro have such a lackluster response? Barely trading back above violated EUR/USD 1.3400 support, and unable to Close the week above it was a pretty weak sign from the currency that should have benefited the most from any real solution. It has also fallen below its 1.3146 early October trading low, with the always important serial supports at 1.3000 and 1.2860 critical the next levels.

The same sort of activity was apparent in the government bond markets. The Gilt future did not even back off below its previous major October-November highs last Friday, and the more range bound T-note future barely backed off a half point, even though each is at a ridiculously low yield level. And the same sort of resilience is still apparent in other markets that seem to feel the equities rallies are triumphs of hope over reason. That is also supported by the degree to which comments out of Germany today are still reflecting a high degree of parsimony in spite of the agreements which were struck late last week.

Thanks for your interest.

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  1. usikpa
    December 13, 2011 at 3:09 PM

    I must have missed something. Where is the anticipated housing stimulus programme that was to come around November 15?

    • December 14, 2011 at 6:38 AM

      Thanks for the interesting question on something that points to factors way beyond housing.

      It is indeed telling that the US government is not dealing with what is still one of the major drags on the economy. In the first instance, it would not likely help much at all. Negative equity continues to spiral downward, and the return to full tilt foreclosure operations now that the Robo-signing scandal hiatus is over means a lot more inventory will be weighing on the market.

      Yet the more important indication is it’s also a symptom of the continued weakness in jobs and confidence. Washington DC is so wrapped up in the partisan “tax or cut” confrontations in every area it can only focus on the most highly critical issues. Literally moving ‘from crisis to crisis’ eats a lot of time that can not be applied to other important areas… until they are deemed crises as well. And more than a few very well-regarded individuals have noted that one major problem with the US business environment right now is that you create a lot of concern over faulty, ineffective laws and regs if it’s all only pushed through in a rush when things are in ‘crisis’ mode.

      We most certainly do not want an authoritarian government like some major competitors. Yet, until the US political dialog becomes more thoughtfully collegial and bipartisan once again, we are not going to get informed address of important issues like the continued depression in housing.

  2. December 14, 2011 at 6:37 AM
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