David Rosenberg writes today that with the Greece issue on the backburner again, benign economic news from China and Australia, it appears that risk appetite is back on. The dollar and yen are selling off:
Global investor risk appetite is back on the front burner with the U.S. dollar and Yen selling off; oil, copper and gold rallying; bonds trading defensively (actually selling off noticeably in Europe); equities firming across the board with Asian markets up 1.8%, emerging markets up 1%, and the global MSCI index up 0.5% at the moment.
EU policymakers are meeting with an aim to backstop Greece’s financial problems — all we need are headlines like that to pop up every day so that investors can keep on breathing a sigh of relief. And, the data were also Goldilocks in nature. China’s inflation rate fell to 1.5% YoY in January from 1.9% and well below the 2.1% consensus estimate, and hence another reason to breathe a sigh of relief since this alleviates concerns over another round of policy tightening.
Then we had Australian employment come out and ratified the view that the global economy is humming along at a very nice clip — jobs rose 52,700 in January, which was more than triple what the consensus community had penned in and the unemployment rate dropped to 5.3% in January from 5.5% the prior month.
The concerns from yesterday over what Ben Bernanke had to say that at some point in the future the Fed will have to start snugging liquidity, and do so without initially touching the funds rate but rather widening the spread between it and the discount rate, conducting reverse repos and raising interest rates on commercial bank deficits at the Fed, has totally dissipated. Meanwhile, the problems in the U.S. housing market continue unabated with the number of foreclosure filings (RealtyTrac data) topping the 300k mark for the 11th month in a row in January (nice to see the Obama modification plan at work) — 315,716 to be exact, up 15% from a year earlier. Banks also repossessed more than 87,000 homes last month, down 5% from December but still up 31% from January 2009.
Moreover, for all those pundits believing that companies are about to embark on a capex cycle, they should consider that the data so far for Q4 show that the reporting S&P 500 companies have thus far boosted their cash holdings by 78% YoY, to $1.2 trillion, and have cut their spending budgets to $30 billion from $41.5 billion.
Source: Breakfast with Dave, February 11, 2010 (free registration required)
