FTSE 100 /quotes/zigman/3173262 6,271 -76 1.20%
DAX /quotes/zigman/2380246 7,721 -113 1.45%
CAC 40 /quotes/zigman/3173214 3,717 -57 1.50%
FTSE MIB /quotes/zigman/1482176 16,835 -486 2.81%
IBEX 35 /quotes/zigman/2759620 8,090 -141 1.71%
Stoxx 600 /quotes/zigman/2380150 286 -2 0.76%
Turning into a bit of an ugly day.
US futures are pointing to an open right now around 0.5%.
The real story today is in Italy, where concerns about the outcome of the coming election seem to be worried.
Raymond James strategist Jeff Saut offers his take on where the market is headed next.
Today is session 23 in the typical 17- to 25-session duration of a “buying stampede.” Such skeins only have one- to three-session pauses or pullbacks before they exhaust themselves on the upside. While a few have lasted for 25 – 30 sessions, it is very rare to have one last for more than 30 sessions. That said, this one feels like it will extend towards the State of the Union address slated for February 12th. That address will likely be viewed negatively by the equity markets, which should serve to finally bring about a 5 – 7% correction. How the stock market reacts following such a pullback will tell us a lot about the market’s future direction. In the interim I favor the upside with the caveat that this rally is long of tooth.
Italy 10yr /quotes/zigman/3483462 4.40 +0.11 2.62%
Spain 10yr /quotes/zigman/3483373 5.40 +0.20 3.83%
TrimTabs: ’We increasingly do not like what we see…’
Stock fund inflows – combining mutual funds and ETFs - summed to $77.4B in January, according to TrimTabs, smoking the previous record of $53.7B (when else, February 2000). “We increasingly do not like what we see … Investors are piling into stocks … while companies are no longer supporting share prices.” (uh, UTX just announced a $5.4B repurchase program).
Dan Fuss of Loomis Sayles is the third bond fund manager to be called a “bond god” (the other two are Bill Gross and Jeff Gundlach).
He is strongly of the view that the current fixed income market is out of control, and that a reckoning is coming.
“This is the most overbought market I have ever seen in my life in the business,” Fuss, 79, who oversees $66 billion in fixed-income assets as vice chairman of Boston-based Loomis Sayles & Co., said in an interview in London. “What I tell my clients is, ‘It’s not the end of the world, but for heaven’s sakes don’t go out and borrow money to buy bonds right now.’”
“The world is changing,” said Fuss, who started in the investment business when Dwight Eisenhower was U.S. President. “We are coming off a period of very low interest rates because the central banks have been buying the bonds. Interest rates are going to go up.”
The idea of the bond bull run coming to an end is a bit more popular, it seems, within the equity side of the world, where analysts are (to some extent) cheerleading the shift from fixed income into bonds. That being said, Bill Gross has clearly been skeptical of the bond market for awhile (having been burnt on a short in 2011).
Nomura’s Andy Chaytor explains the brewing political risk:
In Italy, our economists note that the market is underpricing political risk ahead of this month’s elections. After promising to abolish and refund a tax on first homes implemented by Prime Minister Monti, former Prime Minister Berlusconi’s centre-right coalition is expected to continue eating away at the lead held by Mr Bersani’s centre-left coalition. Meanwhile, Mr Monti’s coalition has again lost third place to the Five Star Movement in the latest polls. While our economists maintain their baseline scenario of a centre-left majority in both houses of parliament, they note that in the increasingly likely scenario that Mr Bersani fails to gain a majority in the Upper House, an alliance with the coalition led by Mr Monti is more likely than new elections. Nevertheless, they note that both the share of undecided voters (up to 35% according to the average of the latest three polls) and, as a corollary, the risk of ungovernability remain very high. While official publication of polling data will stop on Saturday, it will continue on some social networking sites, and our economists note that changes in the share of undecided voters will be“the most important factor to inform political risk and ungovernability.”
Italy down 3.1% now. Random stock halts accelerating
November factory orders revised form 0.0%, to -0.3%
Factory Orders 1.8%, Exp. 2.2%; Ex transport +0.2%,
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