Quote of the Day
When words leave off, music begins.
Most risk asset markets gave back a portion of Monday's gains in a relatively volatile trading session on Tuesday. The big events of the day all centered around Europe. First very disappointing GDP data showed Europe's economy is slowing to a snail's pace with the high flying leader Germany almost experiencing no growth in the second quarter. Secondly the much anticipated meeting between Germany's Merkel and France's Sarkozy was mostly a non-event and did little to impact the market in either direction. Each time one of these macro events (like the meeting) occur they impact the markets for a relatively short period of time and then market participants revert back to the normal market drivers like the condition of the economy and unfortunately for the bulls the economic situation is certainly not very supportive at this time. The cloud that has engulfed all risk asset markets, including oil, is still thick and dark and for the moment will serve to limit any surges to the upside. All of the upside moves in oil and equities since the middle of last week must still be categorized as a relief or short covering rally. There is no evidence in the data that suggests the risk asset markets are embarking into a sustained uptrend rally.
On the equity front trading over the last 24 hours has been mixed as shown in the following table of the EMI Global Equity Index. The Index is still in positive territory for the week by about 1.3% after losing 11% of its value over the previous two weeks (lots of recovery room). The Index is down by 14.9% for the year with all ten bourses in the Index still in the negative column and five of the markets showing double digit losses for the year. Brazil continues to be the big loser of the year while the US market has performed the best...or in other words it is the best of the worst as it is only down by 1.5% year to data. Although the macroeconomic data has been a big negative on all economies corporate earnings have been relatively robust (of those reporting already for the second quarter) suggesting that possibly what is going on with the global economy is actually a soft patch that will dissipate and show improvement during the second half of the year. In any case global equities have been a negative driver for oil prices as well as the broader commodity complex.