EmailLooking at U.S. equity futures Tuesday morning, one would think it was Monday morning again. Futures have a strong bid as market participants hope European leaders will finally act with conviction to counter the eurozone debt crisis.
The same reports that made the rounds yesterday regarding efforts European leaders could take to stem the crisis are circulating this morning, aiding the rally.
Talk continues to focus on either increasing the size of the European Financial Stability Facility (EFSF) and/or recapitalizing European banks.
The difference Tuesday morning is that global equity markets have joined in on the rally. Asia surged overnight while Europe is showing strong gains at midday. They are playing a bit of catch-up following the strength on Wall Street yesterday.
Gains seemed in doubt around midday Monday after German Finance Minister Wolfgang Schauble said there was no plans to raise the size of the EFSF a second time. U.S. equity futures trended upward throughout afternoon trade, though, closing at their highs.
Unlike Monday, we are seeing a flight from safety this morning as Treasuries and the dollar sell off. That precedes the first of this week's longer maturity Treasury auctions -- $35 bln in 2-year Notes.
Despite the indications, this is still a market where seeing is believing and where actions are going to have to speak louder than words.
To reiterate what we wrote yesterday, "enjoy what the market gives you today, but know that it can still be taken away tomorrow or the next day if leaders fall back on fluff, instead of aggressive action, to placate the market."
On that note, participants are looking forward to a meeting today between German Chancellor Angela Merkel and Greek Prime Minister George Papandreou. Little has come out of prior meetings, and that may be the case again today with the meeting preceding important votes in both countries. Greece will vote today on a property tax that is expected to fill a 2 bln euro budget shortfall while Germany will be voting on September 29 on the new EFSF.
There is very little news outside of Europe today. Walgreens (WAG) is trading higher premarket after slightly exceeding expectations in its fiscal fourth quarter (Aug), though the company added no substantive progress has been made in the contract renewal negotiations with Express Scripts (ESRX).
Besides today's Treasury auction, the economic calendar contains the S&P/Case-Shiller reading at 9:00 a.m. ET and the Consumer Confidence figure at 10:00 a.m. ET. The latter is expected to increased from 44.5 in August to 46.6 in September.
--David M. Campione, CFA
Dave is an analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.
