Daily Musings and Music of a Euromarket Professional

Uncomfortable as it may be, being aware of sitting on a time bomb shouldn't keep us from being able to laugh about it - and to listen to some music!

Daily musings of a euromarket professional


Monday 4 June 2012

04 Jun 2012 – " Brother, Can You Spare a Dime" (George Michael, 1999)

04 Jun 2012 – " Brother, Can You Spare a Dime" (George Michael, 1999)
http://youtu.be/8Y9q6wBCd9o

Having remained mostly stoic over the last couple of days, Asia kick-started the week in a sea of red. US reeling from the weak job readings until the close on the lows and the DJI turning negative for the year. S&P still up 1.6% YTD, as is the very wide Russel 3000. Chinese non-manufacturing PMI down to 55.2 from previous 56.1, its lowest reading so far.
Then again, we’ll keep from last week that most PMI readings were beep and showing a worrisome trend.

Nevertheless, pretty uneventful open, in line with the US close and Asian session. Equities half a point weaker than Friday COB. Govies about unchanged, Italy a tick stronger and Spain a tick or two wider (but remaining below 6.50%), as were credit indices. EUR stable to “stronger” on the 24 handle. Commodities still heavy with Oil and Copper down 2%, but with Gold still running a solo show above 1600.
The Greek country debt ceiling was lowered by Moody’s to Caa2 on Friday night, but that doesn’t count as earth-shattering surprise anymore.
With UK still on weekend for the next two days, liquidity and flows should remain below-average.

No shoe dropping Monday morning spirit. Spanish unemployment numbers down a little. Portugal confirmed on EU/IMF track.
EZ investor confidence at -28.9 at the lowest since July 2009, but beating -30 forecasts (after -24.5). EZ PPI, as for last week’s CPI numbers, a tick under expectations at 2.6% YoY (after prior 3.5% revised upwards by 0.2%), which would as well evidence a little room for the ECB to act on Wednesday.
Had risk pick just a tick to have most European equities about unchanged on average (with some strong divergences with the Periphery up 1-1.5%, France flat and Germany down another 1.5%). A bit of softness in the ABF (Austria, Belgium, France) Soft Core.

Next one lining up for (short term) free money: Dutch 3m bills sold at 0.000% for EUR 1.1bn, plus EUR 1bn 6m at 0.014% (after 0.014% and 0.025% two weeks ago). France not there yet, but raising about EUR 8bn with EUR 3.9bn 3m at 0.082% (after 0.084% last week), EUR 2bn 6m at 0.115% (after 0.106%) and EUR 2bn 12m at 0.178% (after 0.18%). So no free money yet, but trying.

Markets getting some steady, albeit non-explosive upwind throughout the session to start the US leg of the day with most EGBs having retreated 4-5 bp, with the exception of Italy having a good 14 bp and Spain a healthy 7 bp tighter bias. Credit indices by and large totally unchanged. Commodities gaining a little, just a little colour.
Support with political noise about the banking union push / use of ESM funds and people getting ahead of themselves every time a German politician acknowledges that growth ought indeed to be pushed. Had some Franco-German ForMin bonding with the new couple testing a pas de deux with mutual acknowledgement of one another’s position.
All good and groovy – until numbers will be put on the table and the tricky question raised who should pay for whom. And by the way, the ECB stayed put on its SMP buying programme for yet another week (12th in a row and not much before since Dec 2011), should you ask...

Had the mood somewhat spoiled as US markets opened and kept sliding, after trading up in pre-market, as  May NY ISM was down to a 6 month low of 49.9 (61.2 prior) and Apr Factory Orders came out at -0.6% (fcst 0.3% after -1.5% further revised to -2.1%). Ex-transport even down 1.1%. So, ouch! So the US will need money, too???? Pass the buck.
Main beneficiary of the data set was the EUR, which was squeezed all the way up to the 25 handle (on record shorts / open interest). Commodities up from early morning, post-Asian depression session lows.
Still, Europe took it on the chin and it barely hurt. Very good Periphery day, although pretty much in parallel shift on both curves. A little steepening  through short end outperformance would have been appreciated for a bullish mood.

 G7 Tuesday conference call announcement to uphold the spirit. Obama administration getting jittery, too?
General feeling of quiet markets, over all. Missing UK input.

Blank new issue screens.

Greek bonds guesstimates: Greek 2023s better at 30% from 30.50% and 2042s at 25% 25.5%.
Quotes were 20.25% and 16.75% before the elections.

Closing levels:
10 YRS Yields: Germany 1,22% (+4); Netherlands 1,59% (+7); Finland 1,58% (+5); Luxembourg 1,63% (+3); Swaps 1,66% (unch); Austria 2,09% (+3); France 2,28% (+5); EIB 2,36% (+3); EFSF 2,50% (+3); Belgium 2,81% (+1); Italy 5,52% (-19); Spain 6,35% (-11).

10 YRS Spreads: Netherlands 37bp (+2); Finland 36bp (unch); Luxembourg 41bp (-1); Swaps 46bp (-1); Austria 87bp (-2); France 106bp (unch); EIB 114bp (-2); EFSF 129bp (-1); Belgium 159bp (-4); Italy 431bp (-23); Spain 513bp (-16).

EUR swap curve 2-5 YRS 33bp (+2,2); 5-10 YRS 48,7bp (-0,6) 10-30 YRS 14,5bp (-0,8).
2 YRS German BKOs closed 0,01% (unch) and 5 YRS OBLs 0,36% (+4).
Ouch! German 2s back to positive at 0.01%... What a beating!

Main at 184 from 184 (unch); Financials at 302 after 302 (unch). SovX at 329 from 330. Cross at 737 from 736.

Stoxx Futures at 2076 / +0,5% (from 2066) with S&P minis at 1272 (-1,0% from 1284, at European close).
VIX index at 27,0 after 25,8 yesterday same time.

Oil 83,0/97,4 (WTI/Brent) from 83,2/98,5 (-0,1%/-1,1%). Gold at 1615 after 1609 (+0,4%). Copper at 333 from 331 (+0,4%). CRB closes 268,7 from 269,1 (-0,1%).
No Baltic Dry fixing given UK holiday. Was at 904 down from 923 (-2.1%) last Friday.

EUR 1,250 from 1,238
ECB deposits at EUR 785bn after EUR 769bn
End of maintenance period will be 12 Jun, so we might see some acceleration in the built up in the coming days. All-time high was EUR 828bn early March.

All levels European COB 17:30 CET

This week:
Will need to live with patchy liquidity with the UK in extended weekend on Mon and Tue. Government supply rush starting again with Spain testing a sale of 2022s on Thu, as biggest test of the week. ECB on Wed.
Not really tons of data.

Germany: Tue Fact Orders (fcst -3.8% after -1.3%) & Service PMI, Wed IP (fcst 0.8% after 1.6% YoY), Fri Import / Export & trade balance
France: Tue Service PMI, Fri Biz Sen
EZ: Tue Comp PMI (fcst 46.5 unch), Retail Sales, Final Q1 GDP, ECB
Periphery: IT Service, Fri IP, PMI SP Tue Ser PMI, Wed Ind Output
US: Tue Comp ISM May (fcst 53.8 after 53.5), Wed MBA mortg a Q1 Productivity, Thu claims, Fri Inventories.

Click link on title or below for today’s musical support:
http://youtu.be/8Y9q6wBCd9o
(International dime chasing season open)

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