French GDP, Swiss Consumption, and the Case-Shiller HPI

Leaving Japan behind, we cast our eyes westward towards Europe and the United States. France reported its final revision for Q3 GDP, showing that it softened slightly in the third quarter (growing only 0.3%), with year over year growth remaining unchanged at 1.7%. UBS released its (Swiss) Consumption Index, showing growth in consumer spending decreasing 9 bps from October's 1.72% to November's 1.63%.

Also from Europe, Yves Mersch is now on record as saying that "the recent European proposals for reform of the economic governance of the euro area go in the right direction, but are not ambitious enough to ensure a healthy and efficient functioning of monetary union." He would like to see faster responses to excessive deficits, with automatic sanctions applied early. And why should anyone care what Yves Mersch says? Because he's on the Governing council of the European Central Bank, making him a voice that will be heard as debate about the future of the euro and the European Union continues.

Arriving in the howling arctic wastes that were once the eastern seaboard of the United States of America, the S&P/Case-Shiller Home Price Index is out. The 10-City Composite increased (barely) 0.2% while the 20-City Composite fell 0.8%, and home prices fell in all 20 metropolitan areas covered by the index.

Also in US news, the winter of our (fiscal) discontent is not made glorious summer by this son of Chicago. Not only do we not have a 2011 federal budget[1], now it has been announced that delivery of a FY 2012 budget will be delayed until around February 21. Mostly because the confirmation of the President's budget director wasn't finalized until November 18, and it takes a while to put a budget together.

Next up? Consumer confidence, in about half an hour.

[1] Blame for that can go to the Congress, though.

It's Four O'clock Somewhere

A day in which the Dow ended up 0.12%, the NASDAQ up 0.41%, and the S&P 500 up 0.37%. A day in which NYSE trading volume hit 1.095 billion shares (down 0.528 billion from yesterday). A day in which equity traders seem to have looked at the news and said "Heck with it. It's 4 o'clock somewhere." All of the excitement came out of the bond markets today where, driven by concerns about the US' long term deficit[1], even the POMO buy-back of TIPS wasn't enough to keep Treasury prices up. Heck, it wasn't even enough to keep TIPS prices up (5-year TIPS yield up 0.108, 10-year up 0.156, 20-year up 0.116, and 30-year up 0.094).

For what it's worth, this is being seen as a correction. Not as a sovereign debt crisis. "For example, the cost of insuring US government debt in the credit default swap market was little changed at around 40 basis points..." That's a good sign.

Oh, and the banks love the rising yields. That means that they can plug their excess assets into low-cost Treasuries, get a better return on the money, and then use those secure assets as their reserve for lending. Coincidentally (?), the financial sector was up 0.27% - beaten only by technology.

Given how bland the markets were today, is there anything going on out there that could impact the markets in the next few days. Sure there is.

The BBC is reporting that Anonymous' war on MasterCard has crippled at least one payment firm's ability to process transactions that use MasterCard SecureCode. If accurate, this could indicate future problems for any credit card company - at least until they figure out how to circumvent the problem.

Gordon Brown, the former British Prime Minister, is predicting a major crisis in the euro in early 2011. Given that "early 2011" is about 3 weeks away, that could further shake up the already-traumatized European financial markets[3].

Russian jets disrupted Operation Keen Sword, the US-Japanese war games celebrating the 50th anniversary of the alliance between the United States and Japan. Keen Sword is taking place in the Sea of Japan, near territory whose ownership has been disputed by Russia and Japan since the end of World War Two. It's not exactly North Korea Crazy levels of international tension, but it is a reminder that you don't have to have Pyongyang involved to have border tensions.

[1] At least the equity and bond markets are beginning to react in opposition to each other again. That's something.

[2] $6.149 billion in TIPS were submitted to the Treasury for purchase, and the Treasury only took $1.63 billion of them. That should give you some indication of how much people want long term Treasuries right now.

[3] Assuming they actually care what Gordon Brown thinks.

How Dare A Rumor Not Be True!

If you remember, the European markets were partly up on the rumor that the ECB was going to take action to deal with Europe's debt crisis by massively ramping up their purchase of the sovereign debt of troubled (and by troubled I mean PIIGS, not all the other troubled nations) debt.

Now? It appears that the ECB plans to just maintain its existing programs - i.e., it is ready to bail nations out if they self destruct, but it's not going to do anything else. And the markets are "disappointed". Their final response will wait until after 1330 GMT today, when ECB President Jean-Claude Trichet addresses the press, but only the delusional (I mean, optimistic) expect anything new.

So, what will happen when and/or if President Trichet disappoints the European markets? Well, in fine European fashion, probably.

Your Word For The Day: Grotty

First off, the euro is up and PIIGS bond yields are down on rumors. The rumors start with a report from "G20 sources" that deputy finance ministers from the G20 nations had discussed the terrible European situation in a conference call on Monday. This, combined with the US Treasury announcing it would send someone to Europe to discuss the EU's pending economic collapse with governments in Berlin, Madrid and Paris[1], has naturally (obviously) led to the conclusion that the European Central Bank will calm the situation by massively increasing their purchases of European sovereign debt.

Jim Cramer, in his lucid days, said that "tips are for waiters". Keep that in mind, until the ECB actually says it will do something.

The European rumors and good factory data out of China (specifically, their Purchasing Managers' Index hit a 7-month high of 55.2) seem to be driving the futures up. There are a few bits of domestic news that could hinder the joyous rumor-driven market frenzy, however.

First off, the Fed is going to have to release details about the emergency loans they handed out during the 2007-2009 market collapse. You remember those, right? The massive bailouts of AIG, and Goldman Sachs, and Morgan Stanley, and Merrill Lynch, and Lehman Brothers...

Oh, wait. That's right. They didn't bail out Lehman Bros. The people who are really excited about the release of the data are curious to see why they didn't get bailed out. Also, most analysts are expecting the data to be disclosed in a less-than-helpful fashion. Or, as Christopher Whalen (managing director at Institutional Risk Analytics) puts it: "My sense is they're going to give us the disclosure in the same grotty fashion (as before). It's not going to be well organized so you'll have to sort through it."[2]

Imagine that. The Fed might not want people to figure out what they're doing. Shocking. Shocking, I say.

Second, Challenger, Gray & Christmas, Inc. has released a report that employers announced 48,711 job cuts in November, up 28% from the 37,986 job cuts in October. In what passes for good news, this is still down 3.3% from the job cuts announced a year ago in November. But hey, they're being offset by plans to add 15,900 seasonal employees in the retail sector and 500 in the transportation sector last month. {3]

[1] Because the US is obviously in a position to explain to other nations how to bring their economic problems under control, and to explain how to implement austerity measures.
[2] Grotty. Adjective. seedy, wretched, dirty
[3] Because temporary seasonal jobs obviously offset the loss of full time permanent jobs. Obviously.

Articles cited:
ECB talk lifts battered euro as crisis worries spread (http://www.reuters.com/article/idUSLDE6AO0HG20101201)
Futures rally on euro bounce, strong Chinese data (http://www.reuters.com/article/idUSTRE69O1D320101201)
Time for Fed to show who crisis loaned benefited (http://www.reuters.com/article/idUSTRE6B014S20101201)
48,711 November Job Cuts UP 28% From October (http://www.challengergray.com/press/PressRelease.aspx?PressUid=151)
Short on votes, deficit panel delays decision (http://www.reuters.com/article/idUSTRE6AS4Z120101201)

Of Course They're Not Pushing. Really.

The Financial Times Deutschland is reporting that several member nations of the European Union are now pushing Portugal to seek a bailout loan. (I'd have provided a link to the original article, but when I went looking for it I discovered that what German I can read has atrophied to the point that I could barely pick out one word in twelve.) This makes perfect sense, since Portugal is one of the PIIGS.

Of course, as we saw just two days ago, Portugal is denying this. They're insisting that they don't need help and all they need to do is enact some austerity measures to ensure that their budget remains solvent. "There is no reason for us to trigger any mechanism," is the official word from the Portuguese Ministry of Finance. There's been no political discussions about triggering any mechanism. We don't know how many times we have to say this, as a government, to stop all this inaccurate speculation."

No, wait. I'm wrong. That quote came from the Irish Minister of State for European Affairs, Dick Roche, on November 15. The Portuguese quote, from 11/21, states: "Once again I recall that Portugal is equipped with a banking system that is modern, sophisticated, well regulated and supervised, resilient and strongly capitalised."

Despite official declarations from Portugal and the EU that all is well, the markets are demanding increasing premiums for buying Portuguese sovereign debt.

"EU denies pushing Portugal towards bailout"

GM's IPO and US data lead to stocks' strength

* GM IPO leads the charge for global stocks
* Government bond prices fall, Irish debt tensions ease
* Commodity prices rebound (Updates with U.S. markets, GM's public trading debut)

By Daniel Bases
NEW YORK, Nov 18 (Reuters) - A blockbuster General Motors Co stock offering dovetailed with upbeat U.S. economic data and easing Irish debt tensions to lift global stocks on Thursday, while the dollar gained on the yen and cut losses versus the euro.

GM's return to the market less than 18 months after it emerged from government-funded bankruptcy raised $20.1 billion, the largest initial public offering in U.S. history, and provided a positive backdrop for investor sentiment.

"The company has rid itself of a lot of liability costs, so there is good reason for this excitement and demand," said Paul Larson, equities strategist at Morningstar in Chicago. "And with all the pent-up demand for vehicles, the outlook for the whole industry is very bright."

Commodity prices rose while U.S. government debt prices fell as credit tensions eased.

Manufacturing activity in the U.S. Mid-Atlantic region grew much more than expected, according to a survey from the Philadelphia Federal Reserve Bank. An improvement in the latest weekly initial claims for jobless benefits also helped strengthen the U.S. dollar.

The U.S. data helped erode the euro's gains as uncertainty about the Irish crisis ebbed after Dublin agreed to work with a European Union-International Monetary Fund mission on steps to shore up its shattered banking sector.

But analysts remained skeptical that any rebound in risk appetite would be sustained, with fiscal problems still severe in Ireland and other peripheral euro-zone countries such as Portugal, and many investors inclined to cut risk exposure before year-end.

"It's absolutely vital for the authorities to take pro-active steps in order to try to resolve this crisis as soon as possible. The market should see some relief in relation to that," said Henk Potts, equity strategist at Barclays Wealth.

In late morning trade, the Dow Jones industrial average rose 177.83 points, or 1.56 percent, to 11,179.71. The Standard & Poor's 500 Index gained 19.55 points, or 1.66 percent, to 1,198.14. The Nasdaq Composite Index climbed 46.94 points, or 1.89 percent, to 2,522.95.

GM's common stock, priced at $33 in the initial public offering on Wednesday night, was up 6.8 percent at $35.25 around noon on the New York Stock Exchange.

The pan-European FTSEurofirst 300 index of top shares climbed 1.34 percent to close provisionally at 1,107.07 points after being as low as 1,091.06.

The MSCI world equity index was up 1.71 percent after touching a one-month low the previous day.

The gains came after Japan's Nikkei jumped 2.1percent to close above 10,000 for the first time since late June, while China shares also rose. Emerging stocks were up 1.6 percent.

EURO'S GAINS PARED
The enthusiasm for stocks led to some paring back of the euro's gains after Ireland's central bank chief said he expected Dublin to receive tens of billions of euros in loans from European partners and the IMF.

The euro was up 0.73 percent at $1.3618, but that represented a pullback from its earlier gain of 1.1 percent to a session high of about $1.3668 on trading platform EBS.

The dollar was down 0.48 percent against a basket of currencies.

The dollar rose 0.47 percent to 83.63 yen .

The benchmark 10-year U.S. Treasury note fell 17/32 of a point in price, pushing the yield up to 2.95 percent.

The 10-year Irish/German government bond yield spread was last at 567 basis points, around 15 basis points tighter for the day but off the session's tightest levels.

U.S. crude oil futures rose $1.78 to $82.22 per barrel and retraced part of a four-session drop, while spot gold gained $19.40 to $1,356.20 an ounce. (Reporting and writing by Daniel Bases; Additional reporting by Jessica Mortimer, Wanfeng Zhou, Ryan Vlastelica, Atul Prakash and Neal Armstrong; Editing by Jan Paschal)

Euro turns down on concerns about bailout

NEW YORK (MarketWatch) -- The dollar turned higher against the euro in mid-morning trading on Tuesday amid rising worries that Ireland doesn't want to accept a bailout from its neighbors, and that some euro-zone members are also reticent to give financial aid. Also, stocks are falling, in part because of worries about china, weighing on investors interest in riskier assets. "Foreign exchange traders are focused on the developments in Ireland, news that Austria is withholding the next tranche of bailout of funds to Greece and the prospect of monetary tightening in China," said Kathy Lien, director of currency research at GFT. "Risk aversion flows should benefit the dollar." The dollar index , which measures the greenback against a basket of six major currencies, added to gains, reaching 78.965, compared to 78.652 late Monday. The euro turned down to $1.3550, from around $1.3580 in North American trade late Monday. Earlier, it rose to $1.3655.