Overnight Sentiment: BTF Window Dressing And Ignore All News
If trying to explain why S&P futures are up another 9 points to 1417, and are now 25 ticks from the Monday night lows, there are so many catalysts: perhaps it was the European September unemployment rate rising to a new record of 11.6%, (Italy unemployment is now 10.8% up from 10.6% but it still has a way to go until it hits Spain's 25%) even as Consumer prices kept inflation at a steady 2.5% rate, or that French producer prices rose more than expected even as spending missed expectations, or that Spanish housing permits collapsed by 37.2% in August from July, or that Greek retail sales plunged by 7.2% Y/Y and the Greek 2013 economic outlook was cut in the latest budget with the budget deficit now seen at 5.2% from 4.2% before and that Greece now sees 189.1% debt/GDP in 2013 up from 175.6% in 2012, or that Japan just cut its economic outlook last night after its manufacturing PMI came at 46.9, the lowest since 2009 excluding Fukushima, or that UK consumer confidence printed -30, vs -28 last and the lowest since April, or that Taiwan slashed its 2012 GDP forecast from 1.66% to 1.05%, or that nothing has been resolved on the Greek labor reforms or the now two month overdue Troika bailout, or that insolvent Spain has still not requested a bailout, or that virtually every company that has reported revenues in the last two "dark days" missed expectations, or that US Mortgage applications tumbled 6% for its fourth straight weekly decline (government refi index down 5.5%, mortgage apps down 4.8%), or of course that Hurricane Sandy will cut both Q4 GDP and corporate profits (not to mention sales). Truly, there are so many reasons why the S&P has now soared since Apple announced the termination of its two key executives on Monday afternoon, one doesn't know where to start (and don't you dare say "window dressing"). Perhaps Kevin Henry would, but sadly his Bloomberg status is now "gray"...
What to look forward to? SocGen explains:
The Greek saga is likely to continue today, but have market participants decided to pay little attention until we get concrete information surrounding the disbursement of the EUR 31bn tranche Greece needs by the end of November? The EU's Juncker made it clear earlier this week that today's conference call between eurozone finance ministers will not bring certainty, and that nothing is to be expected before 12 November. This does not mean that Greece is unlikely to be a market mover until then: finance minister Stournaras announced yesterday that the new EUR 13.5bn austerity measures will be submitted to Parliament next week. As the Democratic Party, a coalition partner, opposes the proposed labour reforms, this may trigger some noise in the markets.
However, by the end of the week, let's hope that market sentiment will be driven more by fundamentals. We'll pay close attention to the US Chicago PMI today, as it is expected to edge back above the 50 threshold. Will it be enough to bring 10Y swap rates back to 1.80%? We're not so sure, as the correlation between US bond markets and US economic data has been quite poor of late, with risk sentiment and mixed US earnings results holding more sway.
Lastly, will the Norgesbank swing the bank into line with the G10's dovish central banks, as did the Riksbank's last week? We don't think so. Norway is much more immune to the slowdown in the eurozone than Sweden. The main hurdle for the central bank is the strength of the NOK, which hit a nine-year high versus the EUR in August, at 7.25. However, Norgesbank's governor Oslen has recently stated that he was inclined to accept more NOK gains as they may help to contain surging house prices. All in all, we see the Norgesbank meeting as NOK-positive today. Next supports in the short term stand at 7.4040, then 7.35, should EUR/USD resume its downtrend.
This too, however, is also irrelevant: just do whatever the Fed and other central banks do...