Morning Note, events and data 24th September 2012

Morning,

Weekend press is skewed to the negative this weekend. The FT highlights Greece needing more time raising fears that the austerity measures imposed will need be met.

Its not just Greece that gives cause for concern. Now the terms of a bailout are being questioned by Spain, and to a lesser degree, Italy. This will only increase tension with voters in German.
The outcome of the EFSF and German court announcement clearly gave the markets the much needed support, triggering a fresh round of short covering and inflows to Europe. The data, however, remains weak and investors now want to see the impact of this "unlimited" European program. The proof is in the pudding.
Markets this week are poised to give back some of the recent gains. With such a strong run in basic materials, industrials and the Euro, fast money or sort term traders will lock in recent gains.

With GDP estimates yet to factor in the German court results and the US announcing rates on hold til 2015, I expect analysts to come out with an improved outlook for GDP recovery. We might even start hearing talks of possible hyper-inflation given the aggression of recent plans. As mentioned before, with the main aim being growth and inflation, US long term debt will see some heavy shorting.... a possible increase of operation Twist, is highly likely.

Markets today.Volumes have been extremely strong across equities. I would expect this to start to slow. As mentioned, all eyes on the data, with Chicago FED tonight and the US durable goods on the 27th.

Inflows back into defensives, such as, telcos and utilities. We should also see some rotation in the basic materials space, with coals getting sold down whilst Alu and Steel see inflows. On a technical analysis level, 323, 347 and 2600 both have broken the downward channel, confirmed support and look set to start moving higher. Borrow rates still cheap but short sellers have limited upside at these levels.

China banks have ran hard lately. With talks of Europe and the US pushing for growth, talks are the China might not need additional rate cuts to support its economy, leaving investors positive banks. This is a poor excuse to buy the sector. Margins are irrelevant, if the loans are bad. With China's property sales still struggling, as the government aims to fix prices, credit and ABS have the potential to be miss priced, adding to NPL's.

Data.15:30 Netherlands GDP
16:00 German IFO
16:30 HK Balance of payments
19:30 Turkey industrial confidence, capacity utilization
20:30 US Chicago Fed
22:30 US Dallas Fed

Events.15:30 Italy's Monti talks about competition
16:30 UK's BoE financial polity statement
20:00 German hearing on German-Swiss tax
21:00 EU hearing on Libor

Earnings.Prada(HK), Lennar(US), Norilsk Nickel