Morning Meeting 12/07/12

The first thing that come into my mind this morning is: Are all running out of solutions? Let's see why.

The FOMC minutes from June meeting showed that conditions may need to worsen before policymakers possibly buy more bonds to stimulate the U.S. economy.

Why do you have to wait things to worsen? The first answer: Because you are running out of solution and you want to keep the “silver bullet” in your belt.

Let's see the other measures that have been taken since the European cash close:

• Brazil cut its benchmark interest rate for an eighth straight time late yesterday.
• In Asia South Korea's central bank lowered the benchmark seven-day repurchase rate by 25 bps to 3% for the first time in more than tree years. The move was expected by the market place.
• According to Bloomberg pool the Bank of Japan is expected to refrain from adding stimulus when it concludes a two-day meeting today.

The result of all these moves:

Nikkei fell 1.35% to 8,731.12, Hang Seng dropped 1.60% to 19,109.80. Oil (WTI) fell 0.23% to 85.61$.

Looking at the results, we can theorize that investors think that lowering interest rate alone without unconventional measure won't resolve the problems markets are facing. (The view on this point has been discussed in the NFP post).

At this point investors world wide will look to European markets for recovery signs.

At 10.00 AM GMT Euro Industrial Production reading is expected at -0.1% versus previous -0.8%.

European crisis' termometer will be the Italian bond auction:

At 10.00 AM GMT investors will know the result of the Italian 3-12-months Bot auction previous average yields were respectively 0.865% and 3.972%.

At 6.00 PM GMT Mr Mario Draghi speech will be followed in searching for a hint to the next ECB move.

For what it may concern the US economy, we got the Job numbers today:

At 1.30 PM GMT Initial Jobless numbers are expected at 372k vs previous 374k, and Continuing Claims at 3300k vs previous 3306k.

Thus, the Macro data today will be closely watched to support the wide spread idea that the worst have still to come, or to gain a bit of confidence or hope that a turning point is near.

We have a busy day ahead therefore stay calm and follow your plan.

Originally posted at www.77sigmatrading.com