It seems weird to feel what I feel today. Tomorrow, the ECB will announce its plans to shore up the bond markets for Spain and Italy, and I feel excited.
Investors are on tenterhooks after brinkmanship in the ECB’s internal negotiations over the plan was played out in public last week, with one newspaper reporting that Bundesbank chief Jens Weidmann even considered quitting.
The above is why my excitement is weird. I understand that politics is a tough game, and sometimes the end result is less than satisfactory or even bad, but my sense is the ECB, Germany, France, Spain, Italy, the northern European countries, and all other interested parties understand the clock is ticking toward midnight on the Continent’s debt crisis. Europe is inexorably sliding into an abyss, everybody in power knows this, and so my excitement is about the possibility that the ECB will finally announce a plan satisfactory to the world, which will alleviate some uncertainty in the market. Oops! I forgot one of my important mottoes – No expectations, no disappointment’s, only surprises.
Today’s market seems to match my thinking. Importantly, at this hour of the morning, it is not selling off. In fact, it is laboring hard to stay solidly in the green. Five of my seven active trades are in the green with decent price action, which makes me think the market is thinking tomorrow just might be a good day in Europe. Yet even if tomorrow is a good day, the politics of Europe will continue, which will mean a bit more suspense and some uncertainty injected back into the market. Oh boy!
The ECB wants to keep markets guessing about its bond-buying moves to discourage speculators and maintain pressure on governments to pursue economic reforms and fiscal discipline.
Back here in the US, the economic data is mixed, which is much better than all bad, but that mixture does create uncertainty as well.
ISM’s index of national factory activity fell to 49.6 in August, from 49.8 in July, and shy of the 50.0 median estimate in a Reuters poll of economists. A reading below 50 indicates contraction in the key sector.
Nothing precipitous about the drop in the ISM. In fact, let’s call it a draw. True, it is below the 50 mark, but, for all purposes, it remained the same in August. That is a good sign, considering the recent data about overall consumer spending for the back-to-school shopping season, auto sales, and sales of other durable goods. At some point, restocking will have to occur, as consumers are spending. At some point as well, hiring will have to occur, as workers are working hard according to the numbers.
US productivity grew at 2.2 percent rate in April-June quarter, faster than previously thought.
Oh, and one more thing about the month of September. If the market did not have enough to think about this month, add the dates below to the list.
EU finance ministers meet in Cyprus on September 14-15 to discuss possible additional aid for Spain and Greece as well as plans for joint banking supervision.
Trade in the day; Invest in your life …
