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Liontrust Dealer's Roar - 28/04/2011

“Many receive advice, only the wise profit from it” – Harper Lee, American author (To Kill A Mockingbird), born April 28th 1926

After having hovered very close to flat through the first half of the session, US markets closed higher with a new yearly high in the S&P (highest since June 2008), new 10 year high in the Nasdaq and new all-time high in the Russell 2000 small-cap, helped by an afternoon rally as the market digested the Fed statement/press conf (Q1 growth more moderate than originally hoped, inflation still subdued long-term, end of QE2 unlikely to have outsized mkt impact), while the USD screamed south despite Bernanke echoing Geithner's comments yesterday on "a strong dollar policy."

Liontrust Dealer's Roar - 27/04/2011

“Any debt restructuring would imply the breach of legal obligations, which most likely would have a more negative systemic effect than the Lehman [Brothers] catastrophe” - José Manuel Gonzalez-Paramo

Overnight we got the closing level Richard alluded to yesterday with the S&P finishing up at 1347, a new high for the year and the highest closing level since June 2008.  

Liontrust Dealer's Roar - 26/04/2011

“Linford Christie's got a habit of pulling it out when it matters most”– David Coleman, former sports commentator and presenter, born April 26th 1926

It was pretty obvious from my journey to work this morning (bus from Wandsworth to the Strand) that London is going to be extremely quiet this week, with virtually no traffic on the roads. With a fortnight’s holiday up for grabs for just three days off, I cannot help but think that there must be a knock-on to UK economic product in Q2. A busy week coming up for earnings in the US (as well as the FOMC meeting) and Europe, as well as Q1 GDP numbers out in the UK.

Liontrust Dealer's Roar - 21/04/2011

“Neither a borrower nor a lender be.” William Shakespeare, English playwright, April 23rd 1564 – April 23rd 1616

Quite what Shakespeare would have made of the current state of the world is anyone’s guess!

The rally monkey having a rare old tear up yesterday! Given the strength across all markets yesterday and after blow-out numbers from Apple post New York’s close, it was no surprise to see Asian markets in good form overnight, nor to see Europe opening hale and hearty again this morning. Having been on the golf course yesterday and missed all the excitement, I enquired of one of my sales traders as to the reason behind such a feisty move as equities had yesterday. His view, which makes sense to me, was that aggressive short covering after a tricky week, ahead of the long holiday weekend, was the primary driver.

Liontrust Dealer's Roar - 20/04/2011

“At the end fiat money returns to its inner value—zero” - Voltaire

Overnight markets melted up without any specific catalyst I could see, European macro remained a headwind but the S&P managed to move on +0.56% though volumes remained light (NYSE 17% below 3 month average). Goldman Sachs closed down on the day -1.5% while higher beta sectors were bought, defensives lagged. One thing making a new all-time high was gold while one thing making an all time low was the March VIX future. What does this tell us about the state of the world? Well,volatility is normally higher when people buy protection, soitdoesn’t feel as if we’re going to get a huge fall before May andgold is the only non-fiat ‘currency’ available plus it’s thought of as a safe haven. I can’t think of any reason why we’d want a safe haven at the moment (worries over Japan andMENA are fading) so that must mean people are buying it as they expect further devaluation in the $….perhaps both a reaction to Bernanke’s “no cold turkey” comment..?

Liontrust Dealer's Roar - 19/04/2011

“Going cold turkey isn't as delicious as it sounds” - Homer Simpson

As Richard mentioned yesterday,S&P warned into the close that they might lower their rating on US government debt (i.e. put them on ‘watch negative’) sending stocks on their steepest decline in a month. The chance of a downgrade in the next two years is 33% according to the agency, firing a cannon ball across the bows of Washington to pare the country’s debts.

Liontrust Dealer's Roar - 18/04/2011

"The party is over. Why should Finland bail anyone out? We won't allow Finnish cows to be milked by other hands." Timo Soini, leader True Finns party.

The day started with all eyes on Europe. An interesting development over the weekend has been the rise of the anti-Euro True Finns party in the Finnish General election. Back in 2007 they only polled around 4%, but it seems that they managed to increase their share to around 19% yesterday. This puts them marginally behind the largest party (the centre-right National Coalition with 20% of the vote) and probably shows us all the biggest future risk in being a bondholder in peripheral sovereigns and perhaps the more stressed European financials. Eventually voters around Europe may encourage what the authorities are currently incredibly frightened of allowing - namely bondholder losses. It seems inevitable that such political movements will emerge over time. However, it’s probably still a bit early for this to fully materialise and influence markets but the signs are there. Indeed we should note that the other three main parties in Finland are still pro-European so the rise of the True Finns is impressive, but a pro-Europe Government can be formed without them. 

Liontrust Dealer's Roar - 15/04/2011

“Corruption is nature's way of restoring our faith in democracy.” – Sir Peter Ustinov, (April 16 1921 – March 28 2004),English actor, writer, wit, raconteur and all-round good egg!

The US market managed to stage a rally post our European close, finishing the session on its highs of the day, little changed overall.

Inflation data takes centre stage today as we start by reviewing China's overnight data before previewing US CPI below. China's CPI rose to 5.4% in March from 4.9% in February. This is higher than the market consensus of 5.2% and brings the series to its highest since July 2008. The PPI was 7.3% and broadly in line with market expectations whereas Q1 GDP was a bit higher than expected (9.7% v 9.4%). In terms of the other releases, Industrial Production (14.4% v +14.1%), Retail Sales (17.4% v +16.5%) and Fixed Asset Investments (+25.0% v +24.8%) were all firmer than analysts' forecasts polled by Bloomberg. With Far Eastern markets dull, it was no surprise to see a similar situation in Europe on the opening.

Liontrust Dealer's Roar - 14/04/2011

“I’m not a bad person,” says Finnish politician Timo Soini, a populist who could come to block EU efforts to bail out debt-ridden Portugal the way it has aided Greece and Ireland. “I’m just saying that bailing out these countries is not going to function”

US markets initially traded easier post our departure but managed to stage an afternoon bounce but still finished slightly lower from our European departure. From where we left the fun last night the DOW moved -0.12%, S&P -0.11% and the NASDAQ -0.06%. Volume on the NYSE was 12.2% below the 3 month average and the NASDAQ was 12.7% below (so not great). There didn’t seem to be much behind the end of day firmer tone and internals weren’t great with the SPX failing to hold its VWAP several times. While the JP Morgan price action despite ok numbers cannot have helped overall sentiment, retail sales at least climbed in March for the 9thstraight month. Crude Oil bounced a bit after two weak days, but  Dr Copper isn’t moving well at all. A note from Goldman Sachs US strategy team pointed to a target of 1525 level for the S&P in 12m time (up 16% from here).

Liontrust Dealer's Blog - 13/04/2011

“They sowed the wind and now they are going to reap the whirlwind”. – Sir Arthur Travers “Bomber” Harris GCB OBE AFC, Marshall of the Royal Air Force, April 13 1892 – April 5 1984.

In the US we saw small business confidence slipping (to a 5-month low), trade data taking down Q1 GDP forecasts to under 2% in some parts of the street (DB down 0.5%to 3.3%), Import prices rising and the TIPP consumer sentiment index dipping (to near 3yr lows) due to the recent run up in Oil. While on US growth the Fed's Dudley suggested that Q1 may come in at a 'somewhat disappointing' 3% saar or less and that employment is nowhere near where the Fed want it to be. The negative data pushed the US market down for a fourth day (-0.78%), the longest declining run since November led by a 2.99% decline in Energy stocks after Oil has now fallen 4.3% from last week's peak. 

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