trading recap

The BOJ hinted at aggressive ease but then merely tinkered and this along with the Fed’s recent modest moves left traders wondering if these guys are almost out of Red Bull. S&P’s finished their worst August in 9yrs -4.7%. The calendar flipped, US ISM surged, and the boys got caught with their beachballs deep underwater. Stocks rocketed as less-bad news crawled out of shadows – world equities gained $1.2trln on t

Data flow was just horrible. Home sales plunge by a record, taking the US back to ’93 levels. Ireland’s downgrade spooked investors, CDS for peripheral EU rose by 5-10% (Portugal CDS 330bps, Ireland 325, Italy 227, Greece 921, and Spain 244). Morgan Stanley said a Gov’t default is likely but didn’t name names (desperate clients pay high fees – why upset ‘em). Asian numbers showed ongoing deceleration. Japan jawboned

Data flow reinforced bearish arguments that as global stimulus fades, developed economies will double dip. A shocking deceleration in Japanese GDP combined with poor Empire State, Philly Fed and unemployment claims data in the US sent strategists scrambling to send their gloomy missives. Global yields continued to collapse, 30yr US inflation breakevens hit 1.9%, Dollar rallied and yet Gold managed to gain 1%. Key cen

Risk markets “sold the news” last wk as the Fed’s move to re-invest mortgage proceeds was discounted and left the boy’s asking “what next?” With earnings in the rear-view mirror and the San Fran Fed forecasting a significant risk of recession in the nxt 2yrs, the glass half full fellas crawled out of their shallow graves. Goldman cut their S&P 500 yr-end target to match the prev wk dngrade of their econ forecast.

Lots of bearish chatter and concern over forward looking data this wk (including Obama econ advisor Romer resignation) but risk assets firmed as mkts priced likelihood that the Fed will print money, buy bonds and keep rates low for ages. IP starting to soften in Germany, talk of more Chinese reserve ratio hikes, China PMI at 51.2 is awfully close to 50, Russian drought fueled explosive wheat rally, US hm sales plunge

Strategists crunched stress test results, wrote painfully boring Monday missives, traders yawned and said “next”. Robust FedEx guidance and weak numbers from Boeing & US Steel swayed mkts; 77% of S&P 500 have beat earnings est (down from 80% prev wk). Econ data turned weak in the US; Durables & Q2 GDP. EU and Asia data was surprisingly firm. Supporting risk assets was a growing sense that rate hikes in Ch

Risk assets had great week. 149 of the S&P 500 companies have reported; 85% beat earnings est, ~70% beat sales est. The EU Stress Test was anything but. Hu says they’ll stimulate consumption in H2, sparking chatter that China’s nearly finished tightening. Brazil hiked rates by less than expected, cpi eased, fueling talk they too are nearly finished. Bernanke caused a hiccup on Wed by not sounding dovish at HH the

23 S&P 500 companies reported this wk. All but 3 beat earnings estimates, and revenue/share grew by 2.6%. The earnings fuelled a risk rally and renewed talk of enduring recovery. As BP plugged their leak on Thurs, weak-handed equity shorts were seen plugging theirs. Spain had a solid 15yr auction, spreads tightened to 446bps. Goldman settled with the Feds. Stocks rejoiced and printed highs Thurs (+7.2% from the J

Major brain damage this wk. UBS cut yr-end call for S&P 500 from 1,350 to 1,150, Barton Biggs sold his tech shares, JP Morgan called for declines in EM stocks, Investors Intelligence hit highest bearish sentiment since Jul ’09, and stocks dutifully surged. EM stocks had best wk in 7mths as China said they’d keep policy moderately loose and Korea hiked rates for 1st time in a show of confidence. European CDS sprea