American stocks rallied strongly today despite poor economic data pretty much everywhere. Come to think of it, the data yesterday was even worse, yet stocks did pretty well then too. The moves had players exchanging theories (LTRO QE, month-end, hedge funds, high-frequency trading) with nothing to hang their hats on.
Well, there were two things. First, European sovereign CDS put in a good performance today. It seems the Eurozone summit aiming to clean up Greece has gotten the nod from investors, and the risk premium allotted to lenders of European sovereigns has decreased significantly. European stocks were significantly higher across the board, and US stocks often keep the pace. Which they did.
The other piece of “good news” comes from Washington, where President Obama has announced an initiative to allow homeowners to refinance their mortgages at giveaway rates. This plan was the subject of rumors a few weeks ago, and was denied by the White House, but now it is revealed for all to see. Banks will be on the hook for the cost, but what the heck, it’s all their fault anyway.