Some days, the market acts much like a perfect partner in a relationship – it takes very little to make him or her happy. Today is one of those days. Bypassing the doom and gloom of late regarding, well, everything, the happy market is dancing higher, casting off the negativity of previous days. And what pray tell is the reason for the lightness of spirit? Hmmm … Now this lift might not last the day, but it does point to what many believe is an understated desire of the market – it wants to go up. Today, the market buoyancy comes from Spain …
Spain raised EUR5.6 billion ($7.3 billion), much more than its goal of EUR4.5 billion. Investors demanded an interest rate of only 1.74 percent to lend to the government for three months, a steep fall from the 5.1 percent at an auction in November.
And Germany …
German business and consumer confidence rose unexpectedly in December.
And the U.S. …
The Commerce Department said builders broke ground on 685,000 new homes last month, a 9.3 percent jump from October. That’s the highest level since April 2010. Building permits, a gauge of future construction, increased 5.7 percent, spurred by a jump in apartment permits.
And China …
China’s November housing inflation eased to its lowest level in the year, a victory for Beijing’s campaign to ward off property bubbles as it steadily loosens monetary policy to ensure a soft landing in the world’s second-largest economy. Average new home prices rose 2.2 percent in November from a year ago, the weakest monthly rise so far in 2011,
And Europe, again …
Growing expectations that European banks will borrow a large amount of funds from the ECB at its inaugural three-year tender on Wednesday and invest some of the money on buying peripheral debt also supported the currency.
True, the three biggest players in the game all are sporting good news today, but the biggest news just might be the market is beginning to believe the not-so-hidden plan of the ECB and the European “playas” could work, the plan identified above.
All along, the politics of Europe have stymied progress on the debt problems. So as politics is, so it goes. Just like U.S. politicians, European politicians have to save their skins, so they say one thing to assuage those who cannot see reality, or who, unfortunately, can live with a bad outcome, all the while working schemes to make it appear as if they acted in accordance with their politics. Sometimes, they just have to find a roundabout way to do the right thing.
The “backdoor plan” of the ECB is to funnel lots and lots of low-interest money to the banks for two reasons. The first is to shore up the banks in case the refuse hits the fan. Remember, the 2008 financial disaster taught us the one ingredient you can’t lose is liquidity. The second is that if the politics of Europe won’t allow the independent ECB to act as a bank of last resort, then all the dependent banks can fill the role. The question many have is: will they use the money to save the system or themselves? My guess is the ECB and the other “playas” will make sure the banks do the right thing this time around.
Trade in the day – Invest in your life …
