Monday, December 12, 2012
With investors generally giving a positive response to Friday's
European deal, attention will now shift to follow-up action,
particularly from the European Central Bank (ECB). The expectation
all along was that unified action from European leaders in creating
a viable fiscal union will give the ECB the needed cover to start
playing a more proactive role in the government bond markets. The
key question in the market from now on will be if and when the ECB
will start playing such a role.
The U.S. economic calendar is fairly quite today, though we do
have a number of important releases on deck for the rest of this
week. We have a Fed meeting and FOMC announcement Tuesday
afternoon, though no one is looking for any news out of the Fed
this time around. With the U.S. economic outlook in its best shape
in a long while, the Fed will just stay the course and not make any
changes. This week brings the November inflation readings, with
Thursday's PPI and Friday's CPI reports. And we will likely get
further confirmation of the improved U.S. economic outlook through
Tuesday's Retail Sales and Thursday's Industrial Production
reports. We will also get the regional manufacturing surveys
through Thursday's Empire State and Philly Fed readings.
Overall though, the 'newsiness' and market-moving potential of
this week's U.S. economic calendar is limited. This will keep
investors focused on developments across the pond, notwithstanding
the Friday agreement. Will the ECB announce its next course of
action, along the lines of the U.S. Fed's quantitative easing
program, or the markets will have to decipher its intentions from
its actions?
If I had to make a wager, I would say that the ECB will not be
coming out with an explicit announcement. But we may not have to
wait longer for ECB's response, as the bond market will likely test
its resolve sooner rather later by again pushing up Italian
government bond yields. A tangible positive outcome of Friday's EU
deal will be if the ECB comes out in full force against such an
uptrend in Italian government bond yields. If that doesn't happen,
then investors will be fully justified in questioning the value of
Friday's EU deal.
In corporate news,
Ingersoll-Rand
(
IR
) announced a 33% increase in its quarterly dividend.
Hewlett-Packard
(
HPQ
) announced plans on Friday to convert the webOS into an
open-source system, likely giving the technology a new lease of
life. HP had acquired the webOS as part of its Palm purchase, but
has struggled to extract any value out of it.
Sheraz Mian
Director of Research
HEWLETT PACKARD (
HPQ
): Free Stock Analysis Report
INGERSOLL RAND (
IR
): Free Stock Analysis Report
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