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Rally Mode

Posted By Barry Ritholtz On January 17, 2012 @ 6:08 am In Markets | Comments Disabled

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Good Tuesday morning. We begin the workweek in the US with overseas bourses in rally mode. Asian stocks rose, with China’s beaten down market gaining 4%. The slowest Chinese growth since 2009 led to speculation that China’s policy makers will ease lending curbs and RRR cut coming.

-Shanghai Composite Index UP 4%…Shenzhen Composite UP 5%, with gains led by energy and materials names

-Strong China data out (GDP, Retail sales and IP)

-Chairman of China’s national pension fund said that quotas for the qualified foreign institutional investor scheme should be increased…this allows for greater foreign investment into China

-China may allow $15.8 billion worth of local pension funds to invest in domestic capital markets in the first quarter, the state-run China Securities Journal reported.

Europe took their cue from rallying China shares. The Stoxx Europe 600 Index climbed 0.8% on Monday when US markets were closed. In Europe, the French debt sale went better than expected — French borrowing costs fell at the country’s first debt auction since Standard Poor’s cut its credit rating on Friday.

All is not well, however, as we shall see in our morning reads: Greece looks to be on the verge of default (tho we believe they have already technically defaulted). The only questions are how much of a haircut for bond holders, and how disruptive the process will be. The UK likely already in recession, with Germany right behind, followed by the rest of Europe. And on top of all that, the European Financial Stability Fund loses its AAA credit rating at S&P after sovereign debt downgrades.

None of that matters to markets today as the animal spirits have awoken. Oil, copper, gold and the euro all higher in early London trading. European markets are off their earlier highs but still strong, we have the FTSE up 1%, Euro Stoxx 1.95%, DAX gaining 1.82%, and the CAC at 1.93%.

More later . . .


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