Monday, December 06, 2010
Well the beginning of last week saw Europe tanking, US data doing ok and China continuing on its tightening theme. But now we have bad US labour data, China increasing money supply and the short Euro play being bazooka'd by the ECB.
The mood has been resolutely bearish in Europe since the US QE announcement, but we feel that, without some enormous Tape Bomb (huge news event), the imminent risks are fading as are the chances of another successful attack on Europe before the end of the year. So despite a good attempt this morning to get the Euro down (involving the cut and pasting of any and every Euro negative headline) we think another Euro bear-squeeze may be on the cards. As for trying to sell Euro on a large US fund man's view on Ireland? Not only do we think said organisation's views get FAR too much airtime, we also remember his Gilts calls. This cartoon in today's London Daily Telegraph sums up the Europeriphery perfectly.
As for equities, the JBTFD ("just by the dip") policy is working well. It doesn’t feel as though many people caught that 4% US rally last week and a year-end melt UP certainly feels like the pain trade, once again, tape bombs forgiving. And with that we guess we would see the usual carry asset suspects go back into "creep up" mode.
And that, folks, is probably that. Mince pies and Xmas parties to dominate global markets from now on, but before we sign off, TMM have been wondering how the ECB is going to be funding their bazooka. Whilst others consider the idea of the E-Bond, we actually think there is another cunning plan being instigated in the background, the first glimpses of such were surely seen last week with the outcome of the World Cup venue decisions. Europe is obviously entering into "Footy swaps", in which FIFA votes are nominally exchanged for funding using some sort of long-dated off-balance sheet product. If we consider the amounts needed, we calculate that duration must be out to 600 years. Football's never coming home.