Investors Ignore Terrifying Data

Published by Filipe R. Costa on Fri, 28/09/2012 - 10:27
austerity in Spain

Daily Market Commentary for September 28: It is always interesting when investors and traders ignore economic data and push markets higher no matter what is behind. Yesterday was one of those days with US main indices pushing higher after a sluggish start and weak economic data.

Let’s start with the good news. Jobless claims in the US, finally came down. Claims are now at 359k, much less than the 376k consensus and a significant slowdown after weeks of persistence around 380k. This is good news, but certainly not the piece to boost an entire market in the way we have seen.

Looking at GDP, the numbers came disastrous. 2Q GDP was revised down from 1.7% to 1.3%. Even worse was the durable goods report showing a decline in new orders of 13.2%. Expectations were for a 5% decline.

Market reaction was negative but investors are not willing to jump out of equities because they think QE3 will boost them higher. They are looking for any piece of data that can offset any bad news. Later in the day, the Spanish PM, Mariano Rajoy, announced new austerity measures, in line with EU recommendations, paving the way for a full bailout. Investors regarded this as very good news, and have been buyers for the rest of the day.

For now the Euro is edging higher with the news coming from Spain, but this is an overreaction as Spain will have a tough way still to go. Catalonia is becoming a problem as they are asking for independence and social unrest is rising to unsupportable levels. We will see what happens but for now I’m really cautious with the current rally.

Name Last price Close Price % 5-Day % YTD %
Nasdaq 100 Index 27/09/2012 2821.6 1.44 -1.4 23.87
DAX (Xetra) 27/09/2012 7290.02 0.19 -1.35 23.59
S&P 500 27/09/2012 1447.15 0.96 -0.9 15.07
Gold (LBM) $ 27/09/2012 176660 1.26 0.22 12.74
Dow Jones Industrial Average 27/09/2012 13486 0.54 -0.82 10.38
CAC 40 27/09/2012 3439.32 0.72 -2.01 8.85
Nikkei 225 27/09/2012 8949.75 0.48 -1.51 5.85
GBP/USD - US $ per £ 27/09/2012 1.6231 0.35 0.06 4.51
FTSE 100 27/09/2012 5779.42 0.2 -1.28 3.72
Crude oil (Brent) Composite 27/09/2012 11140 2.15 2.41 3.71
FTSE MIB 27/09/2012 15450 0.27 -2.4 2.39
EUR/USD - US$ per Euro 27/09/2012 1.2913 0.27 -0.48 -0.32
EUR/GBP - £ per Euro 27/09/2012 0.7955 -0.09 -0.54 -4.52
Crude oil (Light Sweet) Composite 27/09/2012 9225 2.19 -0.6 -6.82
IBEX 35 27/09/2012 7842.3 -0.15 -2.24 -8.45