Santa Claus has come and gone, and so far seasonal tendencies have worked a little magic on domestic equity markets, which have been drifting up. But while U.S. equities appear to be reflecting the goodwill of men and holiday cheer, certain markets are behaving more like Mr. Scrooge.
The credit markets in Europe simply refuse to paint a rosy picture at this time, and we continue to watch a laundry list of barometers that are registering a negative message about whether the continent is beginning to stabilize. The yield of Italian 10 year bonds is one such measure — after compressing rapidly between the end of November and early December, Italian yields have returned to the critical 7% threshold again.
Another market that isn’t faring well is the Chinese stock market. While the U.S. markets are about flat on the year, most Chinese markets are down between twenty to thirty percent, and continue to look like they’re navigating a full fledged bear market.
It’s hard to tell much about the world this week as most people are on vacation and volume is razor thin. At the moment the U.S. markets are holding their Santa Claus Rally, but European credit and Chinese equities are whispering “Bah humbug.”