Just Get The Money And Be Quiet

Published by Filipe R. Costa on Tue, 25/09/2012 - 11:37
just be quiet

Daily Market Commentary for September 25: Equities edged down yesterday on renewed concerns about Spain and economic data. The FTSE retreated 0.24% to 5,838 and it is currently trading down another 7 points today.

It seems that investors aren’t sufficiently satisfied with QE3. While Ben Bernanke was expecting investors to jump into equity markets with his plans to add $40 billion in free money every month, investors are concerned with the lessons learnt from the past. In order for shares to rise in a sustainable way, earnings must rise, otherwise a bubble will form until the day everyone realises how expensive they are relative to their earnings prospects. Companies are ultimately valued by what they can bring investors, by their earnings and cash flows and not by how much Ben Bernanke can throw at markets. Two quantitative easing programs after, investors are not biting the bait preferring to wait for decent economic data and earnings announcements. In fact the latest data released in the Eurozone was not that good, with a couple of Purchasing Managers’ Indices pointing to a possible recession in Europe, as they have been consistently below 50.

While investors and traders were expecting Spain to ask for a bailout, announcing the official move this week, truth is that they most likely won’t do that. Spain is comfortably selling 10 year debt at 5.7% without having to apply too much austerity that has proved inefficient as we have been learning from Greece and Portugal. Besides, Germany is also comfortable with Spain nor asking for a bailout as it means, for Angela Merkel, she does not have to ask the parliament for approval and bring the german taxpayers issue again to the table. She wants Europe to be quiet right now. The problem is that speculators can push yields higher again. The Euro is between two swords. By one side Ben Bernanke will be debasing the USD and by other side the unstable Eurozone will not favour any Euro bulls.

Name Last price Close Price % 5-Day % YTD %
GBP/USD - US $ per £ 24/09/2012 1.6225 -0.03 -0.1 4.48
Dow Jones Industrial Average 24/09/2012 13558.9 -0.15 0.04 10.98
S&P 500 24/09/2012 1456.89 -0.22 -0.29 15.85
FTSE 100 24/09/2012 5838.84 -0.24 -0.93 4.78
EUR/GBP - £ per Euro 24/09/2012 0.7976 -0.26 -1.18 -4.27
EUR/USD - US$ per Euro 24/09/2012 1.2941 -0.31 -1.27 -0.1
Nikkei 225 24/09/2012 9069.25 -0.45 -0.99 7.26
DAX (Xetra) 24/09/2012 7413.16 -0.52 0.13 25.68
Gold (LBM) $ 24/09/2012 176260 -0.61 -0.45 12.49
Nasdaq 100 Index 24/09/2012 2843.98 -0.62 -0.44 24.85
FTSE MIB 24/09/2012 15867 -0.78 -3.66 5.15
CAC 40 24/09/2012 3497.22 -0.95 -1.59 10.68
Crude oil (Light Sweet) Composite 24/09/2012 9207 -1.06 -5.05 -7
IBEX 35 24/09/2012 8138.4 -1.12 -0.12 -5