Dec 5, 2011

Austerity Coming Soon-to Italy

December 5, 2011

It’s risk on today as optimism about the Italian debt situation is fueling a yield drop of 50bps on the Italian 10 year. Italian leaders have proposed a new, $40 billion in additional austerity in spite of a looming recession heading into next year. The plan ties government pensions to contributions instead of a worker’s last salary, brings back property taxes, and adds a levy on luxury goods. The rally in Italian bonds is the first uptick in seven weeks. US equity markets are also bouncing on the news, with equities gaining over 1% on the open. Financials are getting the biggest bid this morning, rising by 2%.

The ISM Non-manufacturing composite (chart below) came in this morning in a positive (>50) range at 52.0, but less than consensus at 53.9. Factory orders, which were expected to decline by 0.3%, declined by 0.4%.

Online gaming company Zynga, famous for creating FaceBook sensation Farmville, is on the road this week. The company is attempting to raise $1 billion in a deal expected to price next week.

Chinese government officials have stated it is unlikely they would be able to use their ample reserves to bail out Europe. “The reserves are not managed that way” said Fu Ying, China’s vice minister for foreign affairs. The IMF is reportedly looking for ways to help struggling European countries, reportedly exploring contributions from Eurozone central banks and the US Fed.

The Cain Train stopped over the weekend as Herman Cain decided to drop out of the Presidential race after being plagued by scandals. Mr. Cain certainly shook up the establishment with his outspoken commentary and out of the box thinking.

ComScore is reporting that Cyber Monday sales were a record $1.25 billion last week and total online sales for the week rose 15% to $5.96 billion.

The big surprise Friday was the decline in the unemployment rate to 8.6% for November. The downside, of course, is that virtually all of the decline was derived from discouraged unemployed workers dropping out of the job search market.

The BCS bowl pairings are out, and Alabama will be getting the rematch they wanted with LSU in the championship game. UCLA offered Boise State coach Chris Peterson roughly 3.5x his present pay, and he turned it down. I think it tells you how bad that UCLA job is when a coach doesn’t want to leave IDAHO for Southern California and $4 million per year. Of course, the new coach will have big shoes to fill as the Bruins have the opportunity to become the first bowl team (yes, they are playing in the Kraft Fight Hunger Bowl) to EVER lose eight games in a single season.

Have a great Monday


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