Mixed Market Kickoff
Macro and Cheese | Sep 24, 2012 06:23AM ET
- Asia mixed: Japan -.45%, China +.65%, HK -.19%, SoKo flat
- Taiwan industrial production +1.89% vs -.60% expected, +.13% previous
- Fujitsu looking for buyer of semiconductor unit
- China Beige Book interviews show manufacturers less optimistic
- Europe moderately down: Eurostoxx -.99%, Dax -.59%, FTSE -.50%
- EC CDS wider: Spain to 3.75% from 3.67%, Italy to 3.37% from 3.29%
- Germany IFO business climate 101.4 vs 102.5 expected, 102.3 previous
- Germany IFO expectations 93.2 vs 95.0 expected, 94.2 previous
- Germany said to be "losing patience" with Spain on aid
In a mixed market debut for the week, Western markets are trumping Asian ones, with the DAX testing the 7400 level after disappointing IFO reports. This is not a major event--the DAX has yet to pierce 7500--but does signal a complete reversal of Friday's rally to a new high.
The IFO reports also beg the question as to where the optimism is that we could have expected following Draghi's "monetary" (read: fiscal spending) operation.
Spain is reported to be dithering over aid, something that could have been expected now that Draghi has pledged "unlimited" support and since Spanish borrowing costs have been slashed by 3%. This dragging is a big deal, because the ECB must have government fiscal cooperation if it is to pull off its plan. Without cooperation from member states, the ECB is merely funding the ongoing regime of governments living beyond their means, Spain and Italy being the poster boys for drunken sailorhood.
The real takeaway from last week is, where is the bounce? Draghi has just bailed out Europe, and Germany's IFO expectations drop? In fact, all along the data curve coming out of Europe, although we do see signs of stabilization, we see no sign of improvement, with most diffusion measurements still well below the growth 50-level, and some headed down to new lows.
This is not necessarily a rejection of Draghi's plan--stocks remain within a few percent of their highs--but does suggest his measures are not enough. In other words, they may be necessary but not sufficient. Debt depressions are tough, and they don't heal overnight.
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