Yesterday afternoon, the markets perked up meaningful as rumors began circulating that something was brewing. Maybe a coordinated central bank statement or maybe something from G-7? Goldman said they think the Fed will begin another round of asset purchases financed through balance sheet expansion (this fits with my thinking, but the size and breadth of the purchases will be important).
Late last night Spain - after months of saying "We're not Greece! We're not Greece!" - decided that might like a little of that bailout juice themselves. Credit markets have been telling me for months that things are getting increasingly difficult for Spain, but there is a culture of "deny and pretend" that is pervasive in politics today so the Spanish government stuck their head in the sand and hoped things would improve. There are likely to be plenty of "emergency" discussions regarding Spain (and probably Italy) in the coming weeks which will all provide fodder for the rumormongers.
That brings us to today's latest round of rumors which were centered on the G-7 meetings. A coordinated message was expected to calm the global markets, but what we got was effectively an agreement to keep on watching things and no joint statement will be issued.
So, obviously the markets decided to ramp higher on this news (which should on the surface be bad for the markets) because a new rumor has emerged that while the G-7 said there would be no joint statement, the market still thinks one could be released. This is sheer madness.
Finally, there will be three Fed governors speaking this afternoon so if this market wants to find a hint of further Fed easing it will have a chance during those speeches.