EmailThe Chicago Bears beat the Philadelphia Eagles 30-24 last night. What does that have to do with the equity market? Nothing. Absolutely nothing. We apologize for the digression, but we wanted to do all we could not to lead with something that had anything to do with Greece, Italy, and the eurozone.
Now that we have achieved that, we're going to talk Greece, Italy and the eurozone in 140 characters or less.
Greece: Still hasn't named a new prime minster; political uncertainty persists.
Italy: Bond yield at 6.58% (had been at 6.74%); key budget vote today; opposition wants Berlusconi gone; political uncertainty persists.
Eurozone: wrestling with Greco-Roman uncertainty, yet German exports increased unexpectedly in September.
So, why are the S&P futures up eight points and presaging a higher start for the cash market?
The convenient answer is that there is a sense of hope that some of the political uncertainty in Greece and Italy will be removed in the near future. That rationale totally misses the point, however, that new political structures in either country will only be temporary, meaning any celebratory response should probably be held in check.
If anything, we suspect the futures are up because the market is refusing to break in the face of so many seemingly worrisome developments, namely the jump in Italian bond yields. That resilience is likely making short sellers feel vulnerable and sidelined participants feel anxious about missing out on further gains.
Those feelings can change in an instant of course, depending on the latest headline out of the eurozone, which has been identified as the tail risk wagging the dog right now.
That being the case, a bullish bias in European equity markets today is lending support to the U.S. equity market.
The Treasury market for its part has a somewhat more circumspect view of things. Despite the indication stocks will continue yesterday's advance at the open, the 10-year Note is flat and yielding 2.04%.
Accordingly, it's probably best not to overanalyze the opening indication. It is what it is... until it isn't at 9:31 a.m. ET.
--Patrick J. O'Hare, Briefing.com
Patrick J. O'Hare is Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.
