Morning Macro Notes

The stock market went to a party yesterday and the band never showed up in the end and we all got gussied up for it. That’s how I feel after China’s Premier Wen did not announce another stimulus plan after saying yesterday he would. Chinese stocks did rally though anyway as there is still confidence that China will do what it takes to get to its magic 8% GDP growth this year.

Commodities though are pulling back. The BoE cut interest rates by 50 bps to .5% as they play catch up in the race to zero. Because they expressed some concern with cutting further, they said they will take other steps to increase the supply of money and credit by purchasing corporate bonds and longer term Gilts.

The ECB cut rates by 50 bps to 1.5% as expected and based on comments in the past from members, it’s highly unlikely they go below 1% as they know their exit strategy from easy money will be easier to reverse by not going lower.
 
 

The weekly AAII individual sentiment data has showed an extreme reading between bulls and bears today. Going back to July 1987, the bears are the highest on record at 70.3% and the bulls are at the lowest level since 1993 at 18.9%, not including the one time spike lower in April ’05 when GM lost their investment grade rating.
 

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