Asian Markets Overnight, European Markets This Morning!
Why Read: To better sit back, observe, and think about what is going on in the world, and in particular in the financial markets.
Featured Article: A Financial Times article reports on this morning's strengthening financial markets and strengthening euro (to 8:00 a.m. Eastern Time).
Commentary: Someone (or a great number of someones) need to give their 'heads a shake'. The Asian and European financial markets have to be having a knee-jerk reaction to Saturday's announcement that up to 100 billion euros will be advanced to Spain's banks. Comments:
first, to the extent at least some of this increase in market prices has been driven by algorithmic trading, it is worth reflecting on the fact that computer driven trading is programmatic. Computers (at least so far) don't 'think', but rather react to the 'human thinking' that has previously been programmed. The programmed algorithms presumably are continuously reviewed and 'tweaked', and new ones are written. That said, it isn't likely much re-programming was done or tweaks made between the time of Saturday's announcement and last evening's (Eastern Time) Asian market opening;
second, whatever happened to the 'market has priced everything in' theory? Surely no one, least of all the 'highly sophisticated' financial markets 'money men and women', thought the Eurozone countries were going to let the Spanish banks, and hence Spain itself, fail! It is increasingly difficult not to be more than a little facetious when observing the short-term day/day ups and downs in the world financial markets;
third, to finish the second point, it was painfully obvious before this past weekend that aid was going to be extended to the Spanish banks, and hence Spain. That the Eurozone finance ministers were going to meet on Saturday was known on Friday - for example see (as reported in this Commentary last Friday) Exclusive: Spain to request EU bank aid Saturday: sources, Reuters, June 8, 2011, reading time 4 minutes. So why did the markets react after the fact - particularly in circumstances where the news released on Saturday arguably was more negative than it was positive - this because it was announced that Spanish bank funding would carry no 'austerity conditions' with it; and,
fourth, an important question that 'hangs in the air' unanswered is: Who makes money and who loses money in financial markets that behave the way they have behaved in the past few hours? There is always quantum equilibrium at the end of each trading day between winners and losers. Where do individual investors fit into this picture - hopefully on the beach enjoying themselves while they still can.
We have lived for a very long time in the developed countries in a 'magical time'. Arguably, the magicians all seem to be exiting 'stage left'.