Is Sentiment Changing to Negative?

Published by Filipe R. Costa on Thu, 11/10/2012 - 11:02
Facebook stock bubble

Daily Market Commentary for October 11: Equity markets were hit down again by concerned investors. The IMF, the S&P ratings agency, the earnings season, all play an important role against the Federal Reserve efforts, undermining QE3 aim.

Ben Bernanke thought QE3 could help boost equity prices, and drag down mortgage rates, to help the American consumer, but the equity part is not giving the desired results as many factors are weighting negatively. Since the start of QE3, gold prices have been rising but the main equity indices are flat or down. The Dow is gaining +0.09% whilst the Nasdaq is losing 2.26% and the S&P also losing 0.28%.

The IMF downgraded global growth and turned the off button in the risk switcher. Helping the bearish was S&P yesterday as they decided to downgrade Spanish credit rating at a very sensible time, adding more pressure to Madrid’s government as if they hadn’t enough for now.

The earnings season is getting under way and investors aren’t very hopeful as they see a weak third quarter, especially from the exporters.

Everything seems to be against Ben Bernanke’s actions and intentions but if we are not exactly in a bullish market, we aren’t also on a bearish one. Every time there is a drop in equities, there’s always a bunch on analysts saying this is the beginning of a larger downtrend, and that they expect a 20% bounce. For now QE3 hasn’t been enough to drive equities up, but has been acting as a safeguard that keeps equity values above certain levels. If the earnings season goes with many negative surprises then not even the FED can help, but if it is just ok, I’m not seeing any large drop in equities. For now, we have to stay bullish on gold. That’s definitely something to add to our portfolio. And probably stay away of Facebook, as the company continues to delude retail investors.

Name Last price Close Since QE3 Price % 5-Day % YTD %
Gold (LBM) $ 10/10/2012 1761.9 1.71 -0.15 -0.93 12.44
EUR/GBP - £ per Euro 10/10/2012 0.8034 0.27 -0.07 0.1 -3.58
Dow Jones Industrial Average 10/10/2012 13345 0.09 -0.95 -1.11 9.23
FTSE 100 10/10/2012 5776.71 -0.09 -0.58 -0.84 3.67
S&P 500 10/10/2012 1432.56 -0.28 -0.62 -1.27 13.91
EUR/USD - US$ per Euro 10/10/2012 1.2859 -0.34   -0.5 -0.73
GBP/USD - US $ per £ 10/10/2012 1.6006 -0.62 0.07 -0.58 3.07
Crude oil (Brent) Composite 10/10/2012 113.45 -1.3 0.18 5.9 5.62
DAX (Xetra) 10/10/2012 7205.23 -1.88 -0.4 -1.6 22.16
Nasdaq 100 Index 10/10/2012 2728.54 -2.26 -0.49 -3.2 19.79
IBEX 35 10/10/2012 7668 -4.06 -1 -2.03 -10.49
Nikkei 225 10/10/2012 8596.25 -4.06 -1.98 -1.72 1.67
CAC 40 10/10/2012 3365.87 -5.02 -0.5 -1.18 6.52
Crude oil (Light Sweet) Composite 10/10/2012 91.26 -5.87 -0.67 3.4 -7.82
FTSE MIB 10/10/2012 15440.5 -5.96 -0.41 -0.61 2.32