It seems the Street’s enthusiasm for the EU debt resolution is starting to fizzle with chatter suggesting a major player may be back peddling.
As you remember, last week investors sent the S&P surging after European leaders presented broad outlines of a new anti-crisis strategy.
A part of the plan involved increasing the ESFS, which buys debt sold by struggling nations and chatter suggested that China might be a buyer. (As Europe’s largest trading partner it stood to reason that Beijing would offer assistance.)
However, during a visit to Austria, comments made by Chinese President Hu Jintao triggered speculation that Beijing was not looking to buy EU bonds, after all.
"We are convinced that Europe has the wisdom and the competence to conquer its momentary difficulties," Hu said.
Supportive for sure, but hardly what the market wanted to hear.
In fact strategic investor Dennis Gartman doesn’t think the Street is going to hear any talk of bond buying out of China – at least not significant bond buying.
That’s not to say there won’t be some positive headlines crossing. Gartman fully expects to hear about some modest assistance but nothing more than that.
”They’re not going to send money down some hole,” he says. “China is not going to be made a fool of. China isn't going to be a dumping point.”
And that begs the question – what happens to the US stock market if the recent rally was predicated on China's involvement.
“To expect China to come in and bail out Europe was naïve best,” says Gartman. “Was the market’s response to EU’s ‘plan for a plan’ overdone. Of course it was!“
How's Gartman playing it?
"I'm long gold and short the euro," he says.
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Trader disclosure: On Oct 31, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Nathan is long Jan puts BAC; Nathan is long Nov & Jan puts MS; Nathan is long Jan calls NFLX; Nathan is long Jan puts INTC; Nathan has long Nov puts CSCO; Kelly is long GLD; Terranova is long APC; Terranova is long F; Terranova is long AAPL; Terranova is long FCX; Terranova is long CAT; Terranova is long AXP; Terranova is long EMC; Terranova is long IBM; Finerman owns BAC; Finerman owns GOOG; Finerman owns JPM; Finerman’s firm owns AAPL; Finerman’s firm owns YHOO and short calls; Finerman’s firm owns IBM and short calls
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