Home > Uncategorized > 2012/07/31: Quick Post: Weekly Calendar and Perspective Now Available

2012/07/31: Quick Post: Weekly Calendar and Perspective Now Available

© 2012 ROHR International, Inc. All International rights reserved.

The weekly Report & Event Calendar is available through the link in the right hand column along with this week’s Summary Perspective on Key Influences. Even as demure as we try to be at most times, due to the pressure on central banks to “do something”, we could not help but note that this is going to ultimately be a proverbial MONSTER WEEK.

And it is no secret that even with the FOMC announcement on Wednesday, the real crux of the matter is whatever transpires at the ECB post-rate decision press conference Thursday morning (US time.) After President Draghi’s bold pronouncement on doing whatever is necessary to save the euro currency project, there will be a major focus on the specifics at that press conference. And even beyond that, there are surrounding factors which are so highly critical…

 

…such as just how much of any expanded ECB liquidity or bond buying program will be supported by the northern European powers-that-be, especially Germany. There was an intergovernmental Love Fest at the end of last week that seemed to represent a consensus between Chancellor Merkel, President Hollande and Prime Minister Monti. However, there are now pockets of dissension and resistance cropping up here and there. And it is not a huge surprise that the Bundesbank is still against direct European Central Bank purchases of government bonds.

And yet, consistent with their commitment to make sure nothing goes awry if what the ECB accomplishes by Thursday is not well received by the markets, there is the ultimate meeting after the ECB press conference on Thursday: Prime Minister Monti getting together with Spanish PM Mariano Rajoy.  That would seem a credible backstop for any disappointment.

While we remain skeptical of the net effect of further quantitative easing, it is important to respect the strength of the equities at least until we see what ECB president Draghi has to say on Thursday. The other interesting aspect in the wake of that is the question we have posed repeatedly for the past couple of years: Is further central bank quantitative easing (QE) is capable of helping the global economy?

It is of some concern that even central bankers have allowed the headwinds are not monetary in nature, but more so fiscal and political and regulatory. Does it really help to rev up the liquidity provision motor if the monetary ‘transmission’ mechanism is broken? We are likely going to find out. Primary government bond markets recovering nicely would also seem a questionable indication for whether the ECB can fix Europe’s ailing economy.

General Market Observations

That is showing up in the current market situation with the September S&P 500 future actually holding no worse than the now violated 1,375 resistance highs (now support) ; even if the more prominent historic congestion remains the 1,350-55 area. While 1,385-90 is a fairly important near term resistance, the whole central bank “doing something’ euphoria is likely worth a retest of the low 1,400 area resistances if ECB President Draghi can deliver any meaningful support for the weak sisters of the Eurozone at Thursday’s press conference.

Thanks for your interest.

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