The markets this morning are feeling a lot better about the investing climate after both Germany and France asserted their support for Greece as a member of the Euro zone. While these statements of confidence are, for lack of a better word “nice”, they do nothing toward fixing the problems Greece is facing.
Euro zone inaction has helped put Greece in an almost untenable position of having to deal with rising yields in the face of austerity measures and without a comprehensive plan to give them some breathing room, it is just a matter of time before they suffocate. Rumors that a Eurobond offering could materialize proved unfounded and essentially nothing has changed from earlier in the week.
Yet this all of the markets need to return to risk appetite, as investors are dipping their toe back into risky assets. It will be interesting to see if the markets will continue in this mode for the rest of today’s session.
Yesterday, the RBNZ in New Zealand left interest rates unchanged at 2.5% citing a weak global economy as the reasoning and said that they are in no rush to hike rates at this time. Nevertheless, the Kiwi traded higher on the rising tide of risk appetite in the Asian session as stocks were higher.
Earlier this morning, the SNB also kept rates unchanged at 0% after last month’s cut and re-iterated their commitment to weakening the Swiss franc as the target vs. Euro at 1.20 is still in tact. Industrial production figures came in better than expected, posting a gain of 3.6% vs. an expectation of 3%.
In the Euro zone, CPI data came in as expected with the core number at 1.2% and the headline figures at 2.5%, which means that the ECB can shelve inflation worries for now, though any action based on these figures and not the overall debt crisis would be ludicrous at this point. Spain was able to get off a successful bond auction.
In the UK, retail sales figures came in slightly better than expected, though the numbers are still weak. This is a “win” for the UK in that the numbers are not worse than expected and even though the data has been worsening, it is doing so at a slower pace. BOE accommodative policy has partially offset government austerity measures, though inflation remains high.
Here in the US, CPI data came in largely as expected with the core figure showing .2%. However, the headline figures were higher than expected showing .4% vs. an also expected .2%. Initial jobless claims came in higher than expected at 428K and while not too aberrant from previous readings, is ticking in the wrong direction. Empire manufacturing number came in worse than expected as well.
With these figures, the markets are giving back some earlier gains and gold is now trading below $1800 to roughly $1780 as USD is strengthening. Stock futures in the US are also pulling back as the correlative effects of a stronger Dollar are taking some risk off of the table.
Bernanke is speaking somewhere this morning and that could produce volatility if he doesn’t stick to the playbook.
As the numbers slowly get worse, the markets are lacking confidence in our political leaders to right the ship. As we continue to double-down on bad economic policy, there is no catalyst to get things moving again.
Increases in government spending though more borrowing and higher taxes is merely re-distribution of a shrinking pie, and while I also believe that the income disparity here in the US is alarming, we need to put people back to work by whatever means necessary.
