This morning's market action can only be described as "blah". There is little going on this AM as there is apparent "Euro fatigue" and only the most stalwart market participants are doing anything, not that there is necessarily anything to be done.
News has been trickling out of the EU negotiations over the debt crisis and there is cautious optimism that something, anything will get done. What will not be done is the combination of the current and future bailout funds as Germany essentially rejected the idea. The speeding up of the current ESM is what is on the table and that appears to be viable, meaning that the funds will be available in 2012 as opposed to 2013.
But again, it doesn't solve the underlying problem. Greater fiscal responsibility is the most important aspect of any deal so a closer fiscal union and treaty changes to allow those changes will likely be the outcome of Friday's EU leaders meeting. US Treasury Secretary Geithner is there to "oversee" the process, essentially acting like a parent standing over a child and forcing them to do their homework.
Meanwhile, industrial production figures came in lower around the globe with one notable exception--Germany. Their industrial production figures rose .8% vs. an expected .3%, though that wasn't enough to prevent the mild sell-off we have seen this morning.
The Euro is trading slightly lower on a lack of faith that the EU process will produce results, and there is no news on the docket here in the US that may move the needle.
Overnight, GDP figures in Australia came in much better than expected, showing a YoY gain of 2.5% vs. the expected 1.9%. It is these types of numbers that leave me scratching my head when I see something like the RBA reducing interest rates. Tomorrow's employment report may disappoint, but by and large the Australian economy looks pretty strong.
The Loonie in Canada is making recent highs and was nearing parity with USD as oil prices and a renewed economic outlook are positive developments, and the fact that the BOC left interest rates unchanged at yesterday's rate policy meeting. Later this afternoon, the RBNZ is expected to leave rates unchanged at their rate announcement.
The Swiss franc has been weakening as unemployment figures have come in as expected showing 3% unemployment that is the envy of any developed nation. What is not the envy however is the strength of the franc that has investors believing that the SNB will take action again to weaken it.
Tomorrow's rate decisions from the ECB and the BOE should produce some fireworks with the ECB expected to cut 25bp and the BOE expected to remain unchanged.
But the big news this week will be the announcement from the EU meeting and with the specter of rating downgrade looming above, hopefully something will get done.
However, hope and optimism isn't an investing strategy, so I prefer to keep my trading to the short-term.
