I had so many alerts pop off on this move, it took 10 minutes for them to stop! As Peter Tchir of Market Advisors said,
"I can’t really remember many days where a single company’s earnings could move the entire global market in all risk assets "
Lets start with the UK, overnight GDP was not good and the UK has entered a double dip recession with a GDP print of -.2% (consensus of +.1). For historical perspective, this hasn't happened since the 1970's. The trend is emerging in Europe as the UK joins Spain and Italy in their second recession. Recession is defined as 2 consecutive quarters of negative GDP growth. Since 2Q/2008, the UK has contracted 9 quarters. This is not transitory, this is a trend and trends tend to continue, "Thus the Trend is your friend".
In this latest series of UK GDP, there is a spotlight on weak construction, or weak housing, another globally accelerating trend (keep an eye on Australia and continuing problems in housing in China).
The French elections are starting to show, whoever win (except Sarkozy-which is looking more unlikely), the political consensus from across the spectrum in France is to move away from the German model of the EU, this is why Sarkozy's defeat will re-shape everything that has been done in the EU to date and Germany will stand with few allies, having lost France. A new consensus will emerge as all EU countries, especially the PIIGS and now France begin to realize that the EU free trade zone was never much more than a conduit for German exports. This realization will have far reaching effects on what the EU looks like moving forward, if it does in fact continue in its existence as nationalism and protectionism rise in individual countries, moving away from integration and toward disintegration of the EU model.
The recent flight to safety in EU sovereign bond land has been to German bonds, that is why the overnight failure of the German 30 year bond auction is surprising. It wasn't a complete failure, it simply didn't raise the target amount of 3 bn, instead 2.40 bn with the German Bund-bank holding the rest. Some ascribe the failure to the overnight risk on move in the markets initiated by AAPL, this is why I say, "AAPL is the market". However I have a different theory, with the EU's fate looking very different then 3 months ago, German exports would have the most to lose in an EU disintegration or any significant changes toward nationalism/protectionism. The 30 year may have just been too far out with uncertainty lying directly in front of us. To wit, the EU market has performed well today. Bad news is good news? AAPL? Or simply an oversold bounce? We will see what the European internals look like in a few hours after the close.
Today is al about the F_O_M_C policy and subsequent Bernakacide press conference. Market consensus is for there to be little change, perhaps slightly more dovish with a lot of talk about "Vigilantly watching and being prepared with the tools necessary should they be needed"or put another way, the F_E_D basically in "wait and see mode". This alone, as mentioned last night (no change) could be a huge negative and taken as a hawkish stance from the F_E_D, but any slight changes that sound a bit more dovish should see the market chose to initially interpret them as QE positive. I often say that, "the market will give you a thousand reasons to justify any stance you want to believe in" and the market WANTS to believe in more stimulus, it is what happens after that will really matter-thus the KNEE-JERK REACTION. I wonder what the F_E_D said about Bear and Lehman initially, if they were simply, "Transitory" events? Believe me, I'm no fan of the manipulation of market fair values by hitting the CNTL-P key at the reserve, my point simply being is the F_E_D since the start of the crisis in 2007 has been several steps behind and deployments of capital have been ineffective, only building the debt pile, not creating a sustainable fix. It's simple, if you are in personal debt, sometimes the only way to pay your bills is to incur more debt, but it is not a solution, it is survival and hope of a future "Hail Marry" that things will change before the debt collectors come knocking.
As recent as yesterday I made a prediction, "more sovereign downgrades", but I was referring to the EU and Holland in particular, surprisingly or at least off my radar screen, the S&P ratings agency is looking at downgrading, ready? India. This may seem irrelevant as India has not been covered much here, that will change. Why significant? India is the "I" in the "BRICS" emerging economies, the supposed saviors of the world economy.
This morning the trend of bad US economic releases continued with Durable Goods
Released On 4/25/2012 8:30:00 AM For Mar, 2012
| Prior | Consensus | Consensus Range | Actual |
| New Orders - M/M change | 2.2 % | -1.5 % | -3.5 % to 0.6 % | -4.2 % |
| Ex-transportation - M/M | 1.6 % | 0.4 % | 0.0 % to 2.4 % | -1.1 % |
This is a stunningly large miss. This is the largest miss since Jan. 2009!
This single report on the day of the F_O_M_C meeting is exactly what the market needs to justify and jot or tittle in the policy statement as being dovish. For the QE hopefuls, back economic data is good news. This also clearly indicates that the economic recovery that was brought on in the early months of 2012 with seasonal adjustments now appears to be as bunk as the arbitrary seasonal adjustments themselves. However, even with that, it was not enough to knock ES down in pre-market as AAPL rules until the policy statement.
I took the time to write this as this is an important series of fundamental data releases, we will cover the macro theme in greater detail, but for now, AAPL reigns for a few more hours. It's time to start looking for tactical moves and be ready for any possible strategic changes from the F_E_D.
