Market Talk

Talk about an Alfred E. Neuman morning. Bulls sporting the “What, me worry?” attitude after the collapse of Portugal’s government late yesterday and expectation it’ll join Ireland and Greece in asking the EU and IMF for a bailout, currently pegged around $113 billion.

It certainly doesn’t come as a big surprise, but the reaction in European stock markets, euro rallying seems just a little too cheery. There’s consequences for Spain, Portugal’s biggest trading partner and Moody’s downgraded Spanish banks in the wake of the Portugal developments. That’s among the items being shrugged off this morning, along with percolating oil and a weaker-than-expected February durable goods orders.

European stock markets have strengthened, rallying across the board, and that’s putting US investors at ease. Portugal? Spain? Well, if the Europeans aren’t worried about it, why should we? Or so must go the thinking.

S&P futures up 7.60, off earlier highs. Ten-year note lower, yield at 3.37%.

There’s a few aspects of today’s market action — both here and in Europe — that border on the absurd, so might be best to enjoy these gains while you can as there isn’t much substance backing them.

The biggest charade is the “relief” unleashed by Portugal’s “successful” sale of government debt, and the outlandish comments coming from Portuguese officials following this exhibition. Here’s a sample, from Newswires’ Geoffrey T. Smith:

Portugal doesn’t need financial help from the European Union or the International Monetary Fund, Prime Minister Jose Socrates said Wednesday. Speaking to reporters at a trade fair…Socrates reiterated that the government is on target with its plans to reduce its budget deficit and that the economy is growing. “We are able to do our work by ourselves. We don’t need anything else than confidence,” he said.

See that? Just need a little confidence, is all.

Socrates also repeated that the country’s economy grew 1.3% in 2010, drawing an unspoken comparison with Greece and Ireland, whose economies both contracted. “By any point of view, [Portugal's deficit and economic growth] is a good result,” he said in a speech at the textile fair.

Guess he didn’t see this one yesterday, from Newswires’ Carla Canivete and Christopher Bjork:

The Bank of Portugal Tuesday forecast the Portuguese economy will shrink in 2011 as the government’s austerity measures take their toll on private consumption and warned that there are considerable downside risks to this estimate.

The bank pegs 2011 GDP at -1.3%, down from an autumn estimate of flat growth. Growth in 2012 only seen up 0.6%. Continue reading…

Still not much sign that either bulls or bears are ready to seize the initiative, with premarket US stock futures suggesting a slightly lower open.

US dollar index at 80.42, now well below yesterday’s highs, with riskier assets not benefiting much from USD’s decline; oil slightly above $82/bbl, gold down a little.

Weekly jobless claims data at 8:30am likely to influence the markets’ early direction. Also due at 8:30am, January trade deficit.

Mixed session for Asian stocks overnight, European markets are lower. S&P futures down 2.20; 10-yr lower, yield at 3.74%.