Archive - May 31, 2012

Due to lack of apocalyptic headlines in the overnight session, and some speculation that Spain will get a one year reprieve in hitting its fiscal pact targets, risk has seen a modest rebound, even if the economic data across Europe was sideways at best, and Goldman even released a note titled "Increasing signs that the improvement in the German labor market is coming to an end." Yet the market, desperate for good news, took reports of German retail sales and French consumer spending, which came slightly above expectations, as an indication that somehow, somewhere Europe may be getting better and ran with it. Of course, with the EUR oversold to record levels, not much is needed for a brief covering spree. That said, with lots of economic news on the docket, including the Irish Fiscal Pact referendum, expect much headline kneejerk reactions during the trading day, which will likely make for a very volatile session.

Plus 5% or minus 5%? That is the question and frankly it hinges far more on central bank and political policy than on any economic data, earnings, new products, etc. So it feels like TARP week all over again. We may not get the 8% swings we got then, but the volatility is picking up and it is difficult to do much in the short term when the real driver, like it or not, will be what decision a bunch of politicians and central bankers, each with their own agenda, goals, and baggage come up with.