2010 10 25

Slow day in terms of news but a pretty eventful day in markets. Basically the same story this month : dollar down everything else up

Further poor sentiment toward the dollar was probably fueled by further G20 statements over the weekend – basically there seems to be no real agreement or actionable plans being devised.

This week will be the peak of earnings reporting. So far this quarter has not been as good as the previous few, but still it has been VERY GOOD and will provide tailwind for the stock market.

This promises to be a fairly busy week with economic data. In US : GDP, consumer confidence, durable goods orders, Chicago PMI
In Europe : consumer and business confidence, German unemployment and UK GDP

Tomorrow’s big data are UK GDP and US consumer confidence

I think trend will be that US econ data holds up – at a low level but certainly faring better than recession. Europe data I think would stay strong enough with Germany (and everyone looking the other way on peripheral Europe). This presents a favorable backdrop to risky assets – stocks and commodities. Although while I am hesitant to stay long (and probably even add length) with SP500 up more than 10% in last two months it’s hard to see what would reverse the trend in the near term.

I do recommend either getting rid of Eurostoxx short or switching that with Nikkei and TSX combo.

One thing for sure, by middle of next week we will have some MAJOR news come out : the fed would have announced much more details on QE by Nov 2-3 meeting, Q3 earnings being basically over, global PMI data and build up to G20 summit on Nov 20.

Next week can be a very different market than this week. This calm is really somewhat scary, but fundamentally – just looking at economic data I feel bullish. Basically I went from being bullish US and bearish Europe to being bullish both rest of the year. That and EM of course.