Global Macro Markets Outlook (July 9 – July 13, 2012)

United States

Dow closed -0.84% for the week as the index sold down on Friday (-0.96) w/volume between 1mm & 10mm shares/day traded. Global industrial growth on the commercial end is still lagging however signs are pointing to increased residential construction (housing starts) in emerging markets which the larger industrial companies remain exposed. Downside volatility for the index over next week remains 12500.

S&P closed -0.55% for the week as the index trended higher through Thursday’s close followed by selling on Friday (-0.94%). Global macro conditions will continue to drive the S&P along w/the DJIA. The stronger USD and lower oil bodes well for the supply chain (PPI) of S&P100 companies to which consumer purchases coupled w/lower producer costs in July should cause earnings to be revised higher, thereby extending a buying opportunity.

Nasdaq closed +0.08% for the week as the index lost 99.92% of the weekly gains on Friday’s sell off (-1.30%). The index is likely to experience upside (>+1.00%) rather downside (>-1.00%) volatility over the course of the coming week thereby the recommendation is to be net long tech or to be a seller of puts in the options market.

The calendar for economic statistics for the week ahead shows consumer credit for May is due on Monday w/expectation to be $3B above the previous $6.5B in April. A stronger USD will likely cause the the consumer credit number to fall short however consumer credit issued (as a line of credit) rather than credit outstanding has likely increased.  I am looking at this report to see how much of a role cash is playing in this recovery relative to credit. Initial jobless claims  & continuing claims are also due to be released Thursday 8:30am EST w/the market expecting a drop in claims, which is ostensibly a signal of job creation. Keep in mind, however, that the underground economy includes those working off-the-books to which such individuals may be ’employed’ yet are still filing claims.  Likely, this economic condition ultimately will result in stronger earnings for the broader market and for major tech stocks.

Continue w/the previous recommendations….

Central & South America

The IPC closed -0.92% for the week as short covers pushed the market higher on Tuesday proceeding the sell-off on Thursday & Friday. Monday’s volume exceeded 348mm shares traded which was 2x’s greater than the shares traded on Tuesday through Friday. The diversified (conglomerates) & retail outperformed f0llowed by financial services. Pharmaceuticals are an attractive sector to look at going forward through the summer (LABB:MM).

IBOVESPA closed +1.91%  on the week as the index pushed higher through Thursday before moving lower on Friday. Volume throughout the week remained strong, roughly averaging about 3mm shares traded w/a range of 4.06mm to 1.71mm shares traded over the week. Engineering & telecommunications services stocks outperformed as mining & natural resources stocks declined. The move into telecom appears to be a income rather a growth play on the index w/movement over the next week to likely to move into financial services (credit) & the retail sectors.

MERVAL closed +1.58% on the week as the index experienced buying through Wednesday prior to Thursday’s sell-off (-1.88%). The MERVAL does tend to follow the IBOVESPA and against the IPC to which energy & diversified operations were the major gainers. Telecommunications companies (TECO2:AR) are undervalued and present a buying opportunity.


FTSE100 closed +1.64% on the week as the index rose on the expectation of the ECB rate cut as well as on monetary easing by the Bank of England. Shares traded topped 1B on Monday while remaining between 400mm & 800mm shares traded from Tuesday through Friday’s close. Utilities & consumer non-cyclicals continue to do well and do not appear to be slowing down going forward.

BEL-20 closed -0.72% on the week as the index declined on Thursday through Friday’s close as the flow of capital left the index on expected weakness from the global slowdown. The end of week sell-off included, retail, banking, insurance, international telecom, industrial manufacturing – electrical components, and mining/metals.

The CAC40 closed -0.87% for the week, following the approximate selling trend as the BEL-20 to which these indices have been correlated over the recent 1 month period. The BEL-20 has had less downside volatility with greater upside volatility over the CAC40 over the same time period. Shares traded on the CAC40 ranged 233mm to 101mm. The banks have really bottomed out when looking at downside volatility relative to tail-risk as upside volatility going forward should be greater from a risk adjusted perspective (GLE:FP).

The DAX closed -0.10% for the week as the index declined marginally after Monday & Tuesday’s buying followed by Friday’s sell-off (-1.92%). The trading pattern over the week was similar to the CAC40 & the BEL-20. The DAX exhibited the best return/risk performance over the week as a function of upside against downside volatility (CBK:GR).

The ATX closed -0.95% for the week as the index marginally declined on Thursday w/a more level gradient w/regard to Friday’s selling when compared to peer indices. The trading patter over the week for the ATX was closely correlated to the CAC40. Shares traded approached 8mm on Monday w/a weekly low of 3.2mm shares traded on Friday.

The SMI closed +1.93% for the week as buying on Monday & Tuesday kept the index higher throughout the week to include marginal selling on Friday. Consumer non-cyclicals including diversified food packaging & confection companies (NESN:VX) which are exporters given a cheaper € will do well over the coming weeks. When we think of Switzerland, it’s not only finance & banking that comes to mind, it’s also chocolate.

Middle East

TA100 closed +1.99% for the week as the index kept the gains experienced throughout the week. Monday’s trading caused the index to spike (+1.83%). Volume ranged from about 300mm to 81mm shares traded over the week. Strength in the more developed European economies pushed the index higher as easing & marginal growth in manufacturing may lead to an increase of Israeli exports into the eurozone.

Asia, Oceania & the Far East

BSE500 closed +1.26% for the week as the index steadily gained throughout the week proceeding the marginal selling on Friday. Flexible monetary policy from the Royal Bank of India along with pro growth policies from the Indian government have enabled the index to push higher. The rupee continues to be range bound and therefore the index is likely to move higher given the relative stability of the currency and the RBI policy to control inflationary pressure to curb rising commodity & agricultural prices.

Nikkei225 closed +0.16% for the week as the gains proceeded the capitulation over the course of trading w/light volume as under 1mm shares/day were traded as utilities & consumer non-cyclicals traded higher. Japanese exports have been on the rise however manufacturing has been slowing considerably. Pharmaceuticals (4503:JP) & general contractors that work globally (1812:JP) should continue to outperform. The BOJ is expected to ease once again to lower the ¥ relative to the weakening € to increase manufacturing exports, which will take time regardless as Europe recovers from an extended economic malaise. FTA between Japan & Canada is a bright spot for Japanese exports going forward to which Japanese manufacturing stocks may be undervalued if Canadian demand is strong for Japanese manufacturing exports.

Hang Seng (HSI) closed +1.85% for the week as buying on Tuesday pushed the market higher followed by marginal buying on Thursday after the PBoC induced further monetary easing after the Bank of England pursued liquidity measures tangentially as the ECB cut the key interest rate. Volume remained strong w/over 1B shares/day traded. Companies that produce substitute food items based on a China slowdown will outperform (322:HK).

Taiwan (TSEC) closed +0.99% for the week as buying peaked on Wednesday followed by gradual selling on Thursday & Friday. Energy & utility stocks outperformed as volume of shares traded ranged 2.1mm to 1.5mm over the trading week. Retail & energy should continue to do well as utility stocks will outperform yet should trail retail & energy.

Jarkarta (JKSE) closed +2.52% for the week as the index pushed higher on very strong volume (2.3B to 3.9B shares traded). The index is +4.5% since June 28.

Shanghai closed -0.08% for the week as volume ranged from 55mm to 76mm shares traded/day. The index capitulated & shorted on Thursday (-1.17%)  followed by covering on Friday (+1.01%). Volume remains healthy w/shares traded exceeding 75mm on Friday’s trading.

NZX50 closed +2.32% for the week as volume traded was volatile ranging 84.7mm to 22.6mm shares/day. The index experienced a steadily rise through Wednesday w/gains kept through Friday’s close as Telecom services stocks did well.

The ASX200 (AXJO) closed +1.54% for the week as buying on Monday (+0.94%) & Wednesday (+1.09%) pushed the index higher with gains kept through Friday’s close. Energy & mining continue to do well as retail & gaming stocks w/lower market caps are expected to outperform over the summer given Australia’s strengthening economic conditions.


Gold: continues to be range bound $1550 – $1650

Oil: Brent & WTI Crude spreads should narrow over the week as Brent falls at a faster rate than WTI over the course of the week over expected appeasement of Iranian pressure on the Straight of Hormuz. The relatively strong USD & weaker euro will keep WTI range bound as growth is expected to rise putting upward pressure on WTI w/Brent lagging.

Agriculture: Demand coupled to supply restrictions will continue to push agricultural commodity prices higher.

Currencies: The € is a victim of the short squeeze and will trade accordingly, trending downward to $1.20 w/short covering by week’s end. The longer-term target however for the € is to trend higher to $1.26 as the currency union appears to see better days ahead. The USDAUD is expected to remain range bound in the interim w/the ceiling at $0.99. The EURAUD will continue to trend higher going forward as Australian exports to the eurozone become more attractive as substitutable goods.  The euro continues to trend lower against the Brazilian Real and is expected to remain on a downward trend toward $2.48. The weaker real against the euro enables Brazilian exports to the eurozone whilst enabling Mexican exports to England.

Sorry – I am cutting this one short 🙂

Have a great week ahead!


Vidia – Ricochet Alternative Asset Management



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