It didn't take German Finance minister Wolfgang Schaeuble long to take to the airwaves and tell the German people (who are on the hook for these bailout funds) that,
-No country in Europe can HOPE for the ECB to fire up the printing presses, Germany will make SURE this DOESN'T happen (this comes back to inflationary concerns as well as German hegemony over the European Union including its Central Bank. This will also be a disappointment to traders and gold bugs as an EU-type QE is being shot down by one of the most powerful men in the EU).
-The ECB DOESN'T have a mandate to Finance states (This is a clear shot across the bow of the ECB's OMT program that envisions buying bonds up to 3 years in duration. Somehow the ECB has set an arbitrary time limit of 3 years in which that is not considered a violation of it's mandate against financing governments, how the ECB arrived at 3 years being the duration when in reality it would be no purchases of any duration, is beyond everyone).
-ESM CANNOT have a banking license (This is something that the ECB and the Southern nations have been pushing for which would radically alter the function and options of the ESM).
In short, Germany was very quick to come out and shoot down any hope that might be created by the Constitutional Court's decision, this is partly to do with policy, partly hegemony and partly domestic politics.
As to yesterday's other key event, the unveiling of the I-Phone 5, this is pure arbitrary opinion, but after having watched the full video on Apple's website, I must say I did not get the feeling of "Wow, I can't wait until it's available!" As I mentioned earlier this morning, the new phone seems to be more of an evolution and not a revolution as past I-Phones have been. I have some trouble with my I-phone now, but figured I'd wait for the 5 to come out, go to the store and buy it on a discount due to the trouble with my current phone; the truth is, I don't want it; for the money I'd much rather have the Samsung Galaxy Note or Note 2 when it is available as you essentially get a smart phone and tablet for about the same price with apparently far better specs and features. I have speculated that the release of the I-phone 5 would be a "Sell the event" scenario and judging by the underwhelming response, it now makes technical and common sense. The market isn't about what you did, it's about forward looking sentiment and if this is the first significant event in which AAPL has lost its edge on innovation, market sentiment may very well be, 'This is as good as it gets-time to sell".
Geo-Political Sentiment.
It seems anti-American sentiment in the MENA region is on fire lately (figuratively and literally). Day after day we have seen it, first in Egypt, then yesterday in Libya with tragic consequences and now in Yemen, Sudan, Tunisia and Morocco. The same American YouTube film that incited the Libyan event ending with the death of the US ambassador and 3 aides has now incited the same storming of the American Embassy in Yemen; all of this over a Youtube video depicting Mohammed as a pedophile.
The European Markets go defensive...
Overnight the European markets opened to a more "risk-off" sentiment, defensive stocks were higher, financials in particular lower (even with some short selling bans in effect). It is speculated the risk-off tone in Europe is simply a response to the F_O_M_C today.
Also overnight Italy said they will not seek aid from the ECB's new bond buying (OMT) program, Spain has said the same. Apparently these last two holdouts are not anxious to give up sovereignty (especially control over budgets) to the Troika or more appropriately Germany and who can blame them after the ridiculous demands made of Greece. No one has any idea on what the ECB has in mind when they talk about "Conditionality" for aid, but if Germany is to participate, the common sentiment is that it will be quite harsh with strong oversight including budget veto powers.
As of this moment, the SPX is trading exactly unchanged, obviously a holding pattern in front of the F_O_M_C.
Recent news from the IMF this morning says Greece will need its THIRD Bailout! The IMF says Greece is incapable of filling its funding gap without EU/ECB help; also that Greece has met ONLY 22% of their fiscal targets! It should be noted that the Greek Finance Minister has denied these report, but as for credibility, you choose, the IMF or Greece?
In the US...
This morning weekly jobless claims were released...
| Released On 9/13/2012 8:30:00 AM For wk9/8, 2012 | ||||||||||||||||||||
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At 382k, this was a miss to expectations by 12k and a 15k rise from last week.
Also this morning, the Producer Price Index (PPI)...
Released On 9/13/2012 8:30:00 AM For Aug, 2012
| Prior | Consensus | Consensus Range | Actual | |
| PPI - M/M change | 0.3 % | 1.4 % | 0.2 % to 1.8 % | 1.7 % |
| PPI less food & energy - M/M change | 0.4 % | 0.2 % | 0.0 % to 0.2 % | 0.2 % |
This was also a miss of 1.4% consensus at 1.7% and up significantly from July's 0.3%. The core rate rose .2% which excluded food and energy inflation, so its clear where inflationary pressures are coming from.
While 1 month of data is probably not going to change the F_E_D's mind much, the hawks on the F_O_M_C just got more ammunition with this morning's release, which is the biggest month over month rise since June of 2009.
Other News/Data...
While we have been looking at miners lately, the situation there, especially for precious metals may be about to change materially as South African miners are set to start a general strike on Sunday. This taken with potential F_O_M_C policy could change the landscape not only for miners, but PM's radically.
Other than that, the main event comes at 12:30 with the F_O_M_C announcement, which if the F_E_D moves forward with any easing that benefits Obama, they will come under a dizzying amount of criticism as Romney has said in the past he would fire Bernie, so the F_O_M_C helping Obama in front of an election will likely be seen as Bernie's self-preservation, especially after the recent Jackson Hole Speech in which the F_E_D was widely seen as punting the ball to Congress, essentially saying, "There's only so much fiscal policy can do without budgetary policy", which has led Moody's to threaten the US with yet another downgrade if the bitterly divided Congress doesn't come together as the debt ceiling is once again approached right before an election.
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