Having lately downgraded the format from Apple Lossless to a meeker version, US equities once more had a more struggling session (5 YRS on the day after the S&P historic high of 1565). So plagued by depression, we closed down a good 1% on average – with the seedless INDU holding just a little better. The umpteenth algo gone wild story doesn’t even need to be mentioned, as this has become common place nowadays. Nearing 50d average on the S&P at 1425 (1.1% away).
Asia likewise weak with yesterday’s Japanese exuberance cut short and reversed today (-2%) and solely China managing to remain just a wee bit in the green. Un-fooled, waking up from denial…
European open nevertheless rather tame, after some pre-open future jitters. Equities by and large on yesterday’s closing levels. EGBs flat to a bit wider, with USTs unable to gain from yesterday’s equity correction. Soft Core sticking out with a 2- basis point tightening, taking Austria below the 2%-mark in 10s.
Periphery, mainly Spain, drifting wider again at open with 2s and 5s some 5bp wider and 10s now at mid 5.80s. Credit a tick wider. Oil still up, given the latest MENA jitters. EUR about unchanged at 1.287.
French Industrial Production surprisingly resilient at +1.5% MoM (fcst -0.3% after +0.2%, revised stronger to +0.6%). Manufacturing up 1.8% (fcst -0.7% after revised +1%). Likewise for Italy with sa Aug IP up 1.7% (fcst -0.5% after revised -0.1%). Still, shouldn’t hide that Italian IP remains down 5.1% YoY (after -4.3%). Summer home works, everyone? Better than the PMI rounds might have shown. Surprising.
Government supply from Germany with EUR 4bn 5 YRS at 0.53% (unchanged from COB 0.53%), was 0.61% in Sep. BuBa retaining a short EUR 900m for market interventions. Healthy 2.2 bid to cover. (Forgot to mention yesterday. Sorry.).
Italian bills on the chop ahead of tomorrow’s BTP auction with EUR 3bn 3m at 0.765% (up from 0.70%) and EUR 8bn 12m at 1.941% (after 1.692%). Ok bid to covers at wider prices. Draghi put fading.
Need to check tomorrow’s probably most exciting auction of the week with up to EUR 3.75bn on-the-run 3 YRS 4.500% Jul 2015 (COB 2.98%, 2.75% at mid-Sep auction), next to EUR 2.25bn off-the-runs Sep 2016 (COB 3.50%), Aug 2018 (COB 4.11%) and some longer Mar 2025 (COB 5.230%).
Eerily quiet after yesterday’s post-ECOFIN cacophony…
Overall hazy mid-day picture: Core EGBs a touch softer, Soft Core firmer as was the Periphery after a change of heart and tightening back. Belgium hitting a 2.39% historic low in 10s.
Bunds 1,49% (+2), OBLs 0,53% (unch), BKOs 0,042% (+0,5) with UST at 1,73% (4)
Spanish 2s 3,18% (-2), 10s 5,74% (-6). Spanish 2-10s 257bp (-3).
Italian 2s 2,31% (-2), 10s 5,07% (-3). Italian 2-10s 276bp (-1).
Equities still hovering near day’s lows (-0.2%), but in reduced volatility. Credit a tick or two wider.
Oil still up a good 1%. EUR sideways on morning levels at 1.286.
Wholesale Inventories at +0.5% (fcst +0.4% after +0.7%, revised +0.6%). Somehow neutral. Beige Book later. Shouldn’t spark unless someone would have spotted massive job increases that would vindicate last week’s NFP.
US cash open slightly negative, but within reasonable means, balancing out rapidly around -0.20%. There’s just not much out there to steer the markets. European main indices high-low prints within a quarter of a percentage point around closing levels. Thanks Jobs, AAPL on the rise today, giving some support to S&P and NASDAQ.
Noon stamina in Periphery bonds unsustainable.
Not much to share. French-Spanish meeting calling for Bank Union asap. Germany opines – alap. Knowing that by and large the ECB is massaging the message that a seriously functioning SSM / Bank Union won’t happen before a while. Haven’t seen yet the daily Spanish “We’re thinking about it”-message (Classical Berlitz link, revisited, a must). Still some seriously ruffled feathers between Catalonia and the central government, the latter insisting the first should start cooperating instead of mulling session thoughts.
Trichet on Spain not being Greece (video link). Oh, and governments ought to get to work…
Uneventful close. Risk softer, as throughout the day, but no softer than that either. Bunds suffering from UST drift wider.
About even closed for Hard Core EGBs. Tick tighter for the Periphery. Soft Core holding well.
Bunds closed at 1,49% (+2), OBLs at 0,53% (unch) and BKOs 0,045% (+0,8) with UST at 1,74% (+5)
Spanish 2s at 3,23% (+3), 10s at 5,78% (-2). Spanish 2-10s 256bp (-4).
Italian 2s at 2,33% (unch), 10s at 5,10% (unch). Italian 2-10s 277bp (unch).
Oil most exciting asset of the day. Gold flat. EUR a bit better. Uneventful.
No real take-away today: sometimes you need a breather and everyone agrees. Need to check that Italian auction, knowing that Italy has a rather well-disciplined primary dealership. Surprises hence rather unforeseen. Will check price development since the auction at 2.75% on 13 Sep.
Again a mixed bag of New Issues spread between mighty safe-haven KfW with EUR 5bn 7 YRS at MS +5 and then split into more adventurous Portugal Telecom EUR 750m April 2018 at 6% / MS +498 (Compare to Jun 18 PGB around 7.15%), unrated German pharma Celesio with EUR 350m 4 YRS priced at 4% / MS +328 and Spanish Enagas for a EUR 250m increase of its Oct 2017 deal at MS +270 (launched end of Sep +335).
Periphery infrastructure and telecom issuers always a happy feast these days…
Closing levels:
10 YRS Yields: Germany 1,49% (+2); Luxembourg 1,59% (+1); Netherlands 1,73% (-1); Swaps 1,76% (+1); Finland 1,76% (unch); EU 1,90% (unch), Austria 1,99% (-1); EIB 2,16% (-2); France 2,19% (-4); EFSF 2,32% (-1); Belgium 2,41% (-1); Italy 5,10% (unch); Spain 5,78% (-2).
10 YRS Spreads: Luxembourg 10bp (-1); Netherlands 24bp (-3); Swaps 27bp (-1); Finland 27bp (-2); EU 41bp (-2); Austria 50bp (-3); EIB 67bp (-4); France 70bp (-6); EFSF 83bp (-3); Belgium 92bp (-3); Italy 361bp (-2); Spain 429bp (-4).
EUR swap curve 2-5 YRS 47bp (unch); 5-10 YRS 84bp (+2,0) 10-30 YRS 60bp (unch).
2 YRS German BKOs closed 0,045% (+0,8) and 5 YRS OBLs 0,53% (unch).
Main at 133 from 131 (1,5% wider); Financials unchanged at 185. SovX at 140 (+5). Cross at 553 (+5).
Stoxx Futures at 2453 / -0,4% (from 2462) with S&P minis at 1434 (-0,3% from 1439, at European close).
VIX index at 16,3 after 16,1 yesterday same time.
Oil 93,3/115,2 (WTI/Brent) from 90,7/113,1 (+2,8%/+1,9%). Gold at 1763 after 1763 (0,0%). Copper at 372 from 371 (+0,3%). CRB at EU COB 309,0 from 306,0 (+1,0%).
A rare feat: Baltic Dry fixed unchanged at 875.
EUR 1,290 from 1,288
Greek bonds guesstimates: Greek bonds frozen with 2023s at 18% and 2042s at 16.5%.
All levels COB 17:30 CET
Rest of Week:
This week will be once more appallingly empty on hard data. Minor US data, too.
Trading will remain rather technical, subject to Periphery rumours and jitters.
EZ: Thu 11 ECB monthly; Fri 12 EZ IP (last +0.6 MoM)
GE: Thu Final CPI 2.1%
FR: Fri Final CPI 2.4%
Italy: Fri Final CPI 3.4%
Spain: Fri Final CPI 3.5%
US: Thu Import Prices fcst +0.7% unchanged, Claims fcst +370k after 367k, Continuous fcst 3275k after 3281k; Fri PPI fcst +0.8% after 1.7% PPI Ex fcst +2.5% unchanged YoY, U Michigan Confidence fcst 78 after 78.3
China : Mon Serv PMI (last 52)
Click link under title or below for today’s musical support:
Quiet, quiet, quiet…
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