The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

Asian markets bounced from the North Korean psycho selloff the day before with South Korea in particular higher by 1.4%. Europe followed helped out by an optimistic economic outlook by the OECD who believes that emerging market growth can help offset any moderation in the developed world. They also believe that German and French banks can deal with losses from their Greek exposure. They have a combined 120b euro exposure to Greek debt. Also lending support to the markets was the fixing of US$ 3 mo LIBOR which rose again but at the smallest % since Apr 15th. With this said, the cost of funding is higher in Europe today after Italy sold 6 mo bills at a yield of 1.33%, well above the Apr auction of .81% and the .57% they borrowed at in March. They released a budget cutting plan just before today’s auction. Portugal sold 5 yr notes at a yield of 3.7%, up 21 bps from the last one in Feb.

The MBA said purchases fell another 3.3% for the week ended Friday and is now down 36% over the past 3 weeks without the home buying tax credit. It’s now at the lowest level since Apr ’97. We knew there would be a drop off, the question though remains of what happens after. Refi’s continued to benefit from the recent drop in interest rates as they rose 17% to the highest level since Oct ’09. ABC confidence fell by 1 pt to -45 but is still 2 pts above the one yr average and has hung in pretty well notwithstanding the turbulence in the markets over the past few weeks. This turbulence though has changed the mood in the newsletter writer community as II said Bulls fell to 39.3 from 43.8 while Bears rose to 29.2 from 24.7, the highest since July ’09.