Missing: Market Mojo

A flaccid performance in the US has fed through to a fairly uninspiring day today in Europe. Although, it looks to me like it is Asia, and in particular China that is calling the tune at the moment. And a 1.5% bounce out East today, having been down a percent at one point has not been enough to provide Europe with much impetus. This, in spite of the ZEW providing a good excuse for a rally. The US really did very little yesterday, flatlining the whole session with the cyclicals down between 3-4% and the defensives between flat and -1%.

The Senior Loan Officer survey was largely ignored. Although it could have been perceived as positive in that the net percentage of banks tightening credit declined versus that of April, the demand for loans deteriorated across all major categories except prime residential mortgages. On a different day, that would have been fuel for a rally, especially that last part, but the market was in little mood for assuming risk yesterday. And looking at the outlook, the banks expect to maintain strict criteria on lending until at least H2 2010. For full details of the report, see here.

So equities aren’t doing much. Volumes are c65% say UBS. Others I’ve asked have described them as LOW (the capitals are key here). If stocks aren’t moving, is anything else? Well oil has rallied back 3% or so as the $ has weakened somewhat. Commodities and all things commodity related are better in general today. And GBP has rallied on the back of the CPI number. Although still below the BoE’s target rate of 2%, 1.8% was flat MoM and well ahead of expectations of a fall back to the 1.5% level. The main cause for the rise came from recreation and culture. Essentially it was toys, computer games and DVDs which held up the number as summer sale discounts were not as deep as expected. This is all interesting and especially so in light of Mervyn King’s comments last week in the inflation report which certainly suggested rates would be lower for longer as he saw the inflation risks to the downside.

We’ve got PPI data, Housing Starts and Building Permits from the US a bit later. Failing excitement in that, it looks like we may have to wait for more Chinese leadership for this market to rediscover its mojo, one way or the other.