It might’ve been a new day, new week, but same market characteristics prevail with dip buyers stepping up. What’s more important is it’s the end of month on the back of a rally (February is >4%) with traders looking to add long exposure when given better prices as early morning losses to last week’s lows were swallowed up. Adding to the reversal was better than expected home sales # with the Homebuilders/Financials leading the charge. (note JPM has analyst day Tuesday and Dimon is usually good for a few market 'confidence' points). In all, the premise speculated of window dressing last week offsetting any downward momentum was evident and has a few hours remaining, FX hedging also plays a role as part of the overall month end fix. ( ~4% monthly equity gain should bring in a lower USD).
Today, ‘Bears’ started to try and stir things up on G20/IMF weekend news of failure to grow the ‘firewall’ fund with 1% morning loss. An easy opportunity and another gift, if this wasn’t an event you had on your radar with a ‘catalytic’ possibility heading into the trading week. The possible events of the week were just listed and this feeble event, just after Greece didn’t go up in flames was completely inconsequential.
The ‘aftermath’ following Wednesday LTRO tender is more crucial for this week and beyond. The consensus is for 500bln demand, but in this view a stronger number, which was viewed as more positive in the first LTRO may prove to be negative as it would suggest banks are still too dependent on the morphine. Overall, it won’t be just a day thing market reaction, but instead will slowly play out into March as we still don’t know what ECB will do later as far as being even more ‘accommodative’. Even answers to ECB’s SMP going forward is now in question, another LTRO of duration is quite clearly off the table as confidence has been re-established.