Week of Mar 1st 2013 – Weekly Recap & The Week Ahead
“In investing, the return you want should depend on whether you want to eat well or sleep well.” — J. Kenfield Morley
1. Italy Bond yields rise to 4-month high as it sells 6-month debt — the results of the Italian election have immediately hit the government where it hurts, with yields jumping to 1.24% in an auction of €8.75B in 6-month sovereign bonds from 0.73% in a sale in January. The bid-to-cover ratio fell to 1.44 from 1.65.
2. 4Q GDP Revised up — per Marketwatch, the nation’s entire output of goods and services, known as gross domestic product, expanded at an annual 0.1% pace in the fourth quarter, the Commerce Department reported. Initially the government said last month that the economy contracted by 0.1%, which would have marked the first decline since the second quarter of 2009. The revised GDP report showed that construction spending rose faster than previously estimated while exports fell less than the government thought. That nudged GDP into positive territory.
3. Sequester cuts set to kick-in as Senate bills fail — Automatic federal budget cuts of $85 billion looked certain to kick in Friday after a pair of bills to replace them failed in the Senate. The budget cuts for fiscal 2013 would not take effect all at once on Friday. Instead, they would go into effect gradually through the end of the fiscal year on Sept. 30. In total, the sequester would cut about $1 trillion over nine years.
4. Chinese manufacturing slows in February — China’s factory activity weakened last month as the official PMI, which focuses on larger state-owned companies, unexpectedly fell to 50.1 from 50.4 in January. HSBC’s PMI, which concentrates on smaller private firms, dropped to 50.4 from 52.3. The timing of the Chinese New Year may have affected the figures.
5. Default worries send Argentine markets into turmoil — fears that Argentina will default hit the country’s markets yesterday, with the Merval stock index tumbling 3.5% and the cost to insure $10M of its debt for one year rising to a whopping $6.6M. The turmoil came after a lawyer representing Argentina’s government told a U.S. court on Wednesday that it would choose to default rather than pay bondholders who won’t accept restructured debt that was issued following the 2001 crisis.
6. AAII Plummeted — according to the weekly sentiment survey from the American Association of Individual Investors (AAII), chart courtesy from the Bespoke Investment Group, bullish sentiment plummeted from 41.79 down to 28.39. This was the largest weekly decline since November 2010, and it was the lowest weekly reading since last July.
The week ahead — Economic data from Econoday.com:
