My Diary 515 --- Flat is Victory?

February 19, 2009 --- Flat is Victory?

Stocks chopped most of the day overnight in US, underpinned by new cycle low in housing starts (466K) & weak IP (-1.8%) & CapU(72%),  but helped by GOOG & AAPL and eventually succumbed to financials' pain as BKX and Citi ended near its Oct low. For a day full of WTE macro data, a flat should be viewed as a victory. But I don’t, simply as Both President Osama’s mortgage plan and Chairman Bernanke all fail to lift the market confidence. Investors are still left with the same bleak reality: housing prices are still too high and many people have mortgages they just can’t afford. For the 2% inflation target, in an environment with rapidly rising UNE and plummeting capU, it would be welcomed, but a target isn’t a plan and goals are useless without details. As I discussed yesterday, the economic reality and political hope do not mix well together. Surprisingly those policy makers have not learned that lesson recently. Until they do, the bloodletting is set to continue.

Local market wise, China is the wild card and with no concrete evidence, local talk is of Chinese money coming across the border yesterday. The HSI rally in the face of the A-share plunge was a notable change from the recent high correlation. The local press is abuzz with property "Price Wars" but the story is a little old  and today Japanese credit seems to be behaving better…Today I expect largely flat even HKCN ADR down -1% overnight.

Overseas Market Reviews

Global equity moved down again with -1.5% in Japan, -0.3% in EU and US. The world equities receded 4.7% since Friday. Elsewhere, USTs gave back some gains with 2yr up 9bp to 0.95% and 10yr climbed 11bp to 2.76%. 1MWTI oil slipped $0.31 to $34.62/bbl, lower about $3 this week. Industrial metals and agriculture prices have also moved lower about 5% this week. USD has risen 2.6% against EUR to $1.253, 2% vs. YEN to 93.8, and 2% vs. EM currencies