Moving the Market

ES was subdued for most of the night, by the 3 a.m. EDT European open, ES was close to the regular hours lows of the day. A successful short term Italian debt auction which was financed with LTRO cash as they were182 day bills and 331-day bills, well within the 3 year LTRO and with the ECB spreading rumors that the next LTRO could be up to $10 Trillion dollars, why not go ahead and spend that cash at this point when the next LTRO in February will likely take care of all of their financing needs? However, should the bills fall outside of the 3 year LTRO, I wonder what the hit rate and yields would be then?

ES climbed a bit on the good news out of Italy, but it didn't last long, interestingly about a half an hour before USE Q4 2011 GDP was released, the market stalled, we all know that the news networks all had the GDP number in advance under embargo from their audience, who's to say though that a quick coffee break call wasn't made to 200 West Street? Financial news perks, that quick call must be worth at least a Lamborghini!

To say Q4 GDP missed is to miss the point. Yes, Q4 missed at 2.8% vs consensus of 3% and word is the whisper number on Wall Street was significantly higher. However to see a .2% miss is to MISS the real Q4 GDP and its implications as head line numbers are all most investors look at.

How about if nearly 1.95% of the 2.8% number was due solely to restocking? Some might even say Channel Stuffing. Well that would be the truth which has some dire consequences now and in the future. First without the huge restocking contribution, GDP would have come in around between .7 and .8%. As far as the effect that massive restocking will have on Q1 2012 GDP, well Q4 2010 restocking subtracted  1.8% from the final .4% Q1 2011 GDP and the kicker is that restocking in Q4 2010 was only .9%, this qtr. we are near double that, so Q1 2012 GDP is already set off on a nasty and very likely decline.

That's the stuff that headline numbers miss.

You can imagine what ES did from 8:30 on.

Although there's been lots of other filler news, nothing of real consequence has come out, especially from Greece where the clock is tick, tick, ticking away. However Mitt Romney did ask Newt Gingrich for an apology in the Florida debates. Of course I know it's political theater, but I personally wouldn't want to be the buy running for President who is playing up that his feelings were hurt during a campaign.

Here's ES overnight, note the trajectory in 3C even after the EU open.

Who knows how far a leak may actually go back?