Short Term Thinking and Debt Concerns- US Update

Equities managed modest gains all round yesterday and Europe (after a negative opening) is showing further gains this morning as, apparently, “European Debt Concerns Eased”. Have they really? Well yes they have, but only because the focus of the market at the moment is incredibly short term and likely to reverse over any headlines that may appear tomorrow. Yesterday a Norwegian fund apparently bought some Greek debt, as they “do not expect a default” (presumably nobody is buying the debt because they DO expect a default?). Portugal and Poland managed to hold successful bond auctions, which gives short term evidence that less strong European credits can still raise money in the markets successfully. Does that constitute an easing of fundamental concerns though? Was there anything yesterday to suggest that longer term debt problems in Europe have lessened? Of course not. For the moment, any day markets go up headlines will proclaim that concerns have “eased” and any day they fall concern will have “increased”. Media poppycock- still... good markets for day traders I guess.
For those seeking clues about longer term trends, watch the data for clues about what is really happening and accept that this market is looking for excuses to continue the rally- decent manufacturing numbers in the UK was enough yesterday for a small dose of cheer. To repeat... we still have an economic recovery going on, weak and uncertain though it is. All the fears (mine included) about whether it can last are just theories- the fact is that, for the moment, it is continuing.
However, there are several factors that could undermine that recovery and data such as US homes sales, and unemployment, consumer sales in the UK and USA and GDP numbers give cause for concern.
Be cautious and ignore the media headlines, which are very good at telling you what happened yesterday and totally rubbish at predicting what will happen tomorrow.
CDX tightened a couple of basis points yesterday, despite another heavy issuance calendar, including; $2bn from Bank of Tokyo-Mitsubishi, $2bn from American Express, $2.75bn from Vale overseas and $3bn from Hewlett Packard. That’s over $30bn bonds that have come to the market in the last two days, the biggest two day total since November 2006. ITRX this morning is 3bp tighter- new issues over here yet to catch fire in the way the US market has.
Today we see jobless claims numbers from the USA. The BOE announcements in the UK gave us no surprises. Let’s hope secondary markets get as busy as primary... Happy Thursday.