At least for now, Germany is finding no company in the EU to implement the silly ban on the naked shorting of euro area debt and of naked purchases of CDS on sovereign debt. The nonsense of the rule, among others, is that it only impacts those transactions done on the German market. Foreign branches of German banks outside the UK won’t be affected. The other fear is that other countries in the Euro Zone will eventually agree to a more uniform ban just as the area needs as many investors as possible to buy their debt. All this does is scare them off. I’ve used this before but politicians when it comes to markets should pull a George Costanza and do the opposite of their instincts.
Following the sharp drop in permits in yesterday’s April Housing Starts data, the MBA said purchases fell 27.1% for the week ended Friday and are now down 34% in the past two weeks at the lowest level since 1997 in response to the end of the home buying tax credit. A drop off was to be expected so its what happens after the drop off that will be so key to watch. ABC confidence rose 3 pts to -44, a 6 week high as the State of Economy component rose to the highest since Oct ’08 and Personal Finance matched its highest level since Jan ’10. In light of all the markets macro concerns over the past week, hopefully the improving labor market in the US is the background to this improvement in confidence.
II: Bulls 43.8 v 47.2 Bears 24.7 v 24.7 Correction 31.5 v 28.1