13 Nov 2012 – “ That’s The Way ” (Led Zeppelin, 1970)
As Greek
discussions overnight revealed a spat between Europe and the IMF, and given yet
another closing slump in the US, Risk started on a weak footing with Risk
nearing Friday lows, before being ramped up by rumours, showered again and
finally supported by the US opening in negative, albeit tame manner, before
moving into positive territory and taking everything along. Given the noon
despair, the afternoon relief seems…exuberant. Especially as the US still lead
the way.
"That's The
Way" (Bunds 1,34% unch; Spain 5,83% -5; Stoxx 2494% +0,8%; EUR 1,272 +1)
---
Eventually, algos
DO have some sense of humour, otherwise one couldn’t explain yet another next
to unchanged US close with the S&P closing right on the 200d average… of a
couple of days ago (200d 1381). Whatever. US bonds closed, equities trading at
50% of volume because of Veterans’ Day. Yet another failed attempt to bounce
off that S&P 200-day mark.
Asia
finally very weak overnight. China
fast on its way to re-test the 2004-low print of late September, which, in
turn, was the lowest since 23 Jan 2009 (then right before Chinese New Year).
No hard data, but
sentiment broken by the lack of US upside and by overnight news on Greece
showing that things remain tricky. Indeed, an open spat was revealed between
the IMF and Europe on when to get to a 2%
deficit. At the end of the day nobody really cares whether this should be 2020
or 2022, of course, as this is so far away in time that it is irrelevant –
outside punching these numbers into a spreadsheet that will spit out some
theoretical result that only makes sense in a non-human, non-political world. Algo, I hear you coming. Still. Spat is
spat. A final decision is now due on 20 Nov and, in the meantime, we’ll just
juggle some more and hope not to miss any catch...
European equities
gapping down over 0.5% from yesterday’s close in early future trading and stuck
there at cash open. EGBs in slight Risk
Off-mode, although it gets difficult to push the Hard Core much tighter.
Periphery duly wider by 3-4bp across the curve.
30 minutes later,
equities went to tickle last Friday morning’s lows, extending losses to 1% with
EGBs now reacting and Bunds re-testing their 1.32% low of last week and taking
all others along for the ride, except of course the Periphery Twins, widening
another 3bp with Italy at 5.07% in 10s (B+375), Spain at 5.94% (B+462); 2 YRS
Italians at 2.22% and Spanish peers at 3.25%.
Having had that
discussion a couple of weeks ago, one will note that Spain’s 10 YRS benchmark
is indeed a Jan 2022 and that an interpolated 10 YRS (with the Jan 2024) would
reveal a yield 10bp higher, i.e. past the 6%-mark.
Commodities off to
a weak start, in line with the soft overnight sentiment, and with the EUR
trading 1.267, the lowest since early Sep.
Macro data
unsurprising with French Q3 Employment ticking down0.3% (after -0.2% in Q2).
Final Italian CPI at 2.8% and Spain’s
at 3.5% YoY (EU-harmonized).
Had Schaueble &
Moscovici playing Love Fest on each other and for Greece. Still, no one knows how to
deal with the Greek debt, but there will be a way. Without any OSI, though.
Just need to find something. Then again,
it took Odysseus 10 years to find his way back home…
It did floor the market
until ZEW data for Germany
and the EZ was published, showing tanking German Current Sentiment to +5.4 and
Economic Sentiment to -15.7. Current had been forecasted +8.2 after 10 for Sep
(and steady decline from April at 44, then 33, 21, 18 and 13) and Sentiment forecast
had been -10 after -11.5 (and before that -18, -26 and -19). Steady decline
from Current high since 2009 at 91.5
in May 2011. EZ ZEW expectation at -2.6 after -1.4.
Through this year had been -22.3.
Dutch (tap) auction
quickly done and dusted for EUR 2.1bn at 1.579% (COB 1.605%) on an up to EUR
3bn target. Not bad, near June all-time lows of 1.53%. Seems fair.
Bill supply: Italy with EUR
6.5bn 12m bills at 1.762% (after 1.941% last month, but 1.692% in Sep, having
been OMT’ed from 2.77% mid Aug and a high of 3.97% in June). Greece bridged,
together with its banks, part of its IMMEDIATE funding needs with EUR 1.3bn 3m
at 4.20% (down from 4.24%) and that extra slice of EUR 2.76bn (targeted EUR
2.125bn) 4-week bills at 3.95%. So why the stress? Finally, Belgium issued
EUR 1bn 3m at -0.004% (from +0.004% 2 weeks ago) and EUR 1.3bn 12 at +0.076%
(from +0.072% one month ago).
EUR 5bn new German
2 YRS 0.000% 12 Dec 2014 (about 0.06% over the outstanding Sep 2014, COB -0.030%)
tomorrow. DE0001137404.
Thursday: The
Italian bond auction will be the highlight of the week with EUR 3.5bn in on-the-run
3 YRS 4.500% Jul 2015 and up to EUR 1.5bn in 4.75% Aug 2023 and 5.25% Nov 2029
bonds. France
with EUR 7.5bn 2, 3 and 5 YRS BTANs and OATs. Ireland to sell EUR 500m 3m bills
on Thursday.
Italian auction
results soothed some raw nerves (despite Italian debt now hitting another all-time
high of EUR 1,995bn so the two trillion is in sight) and had the Periphery claw
back some losses with Italy just marginally wider from COB (but Spain still
sluggish).
Still, a heavy
market with Risk retesting opening lows around -1% and Credit out by 2.25%
across the board. Readying up to test Friday’s lows.
Saved by the gong
as Juncker played down the difference with the IMF on Greek targets as being
“nor real dispute”. Just a false one, then.
Had likewise media
rumours (BILD - of all well-informed "financial" papers)(Argh!!!)(…) stating Germany wanted to bundle aid tranches
totalling EUR 44bn for Greece.
Seems very much at odds with the late haggling, unless the Troika was to shove
that over as the latest concession before closing its intervention in Greece and
leave the country on its own.
Whatever. Good for
a +0.50% in equities and a 50 pips spike in EUR/USD. Tight markets.
Mid-day levels
recovering from the initial weakness and failed attempt to test Friday lows
with Risk suddenly buoyed by the latest rumours. Had Core EGBs back to flat
with Austria stuck at new
historic lows; France and Belgium on its
heels. Italy back to closing
levels, but still above 5%, leaving Spain still on the drift.
Bunds 1,35% (+1),
OBLs 0,37% (+1), BKOs -0,038% (+0,3). UST 1,60% (-1)
Spanish 2s 3,24%
(+5), 10s at 5,93% (+5). Spanish 2-10s 269bp (unch).
Italian 2s at 2,15%
(-1), 10s at 5,02% (unch). Italian 2-10s 287bp (unch).
EUR pretty much
unchanged from yesterday’s closing levels, after having tested 1.266, before
spiking out vertically. Commodities sideways now with just Oil still down 1%.
Waiting for the US open for
follow-up movement with not much in terms of US figures to start the afternoon.
And somehow it
dimmed on players that BILD might not be the reference paper to follow after
all. So back to late morning levels after all. 3 hours bump. Just in time for
the US
cash open.
US cash opened down
“only” 0.40-0.5%, helping lift Europe a little off the ground trailing every
tick from the start to unchanged levels, a recovery interrupted by IBD Optimism
figures at 48.6, missing a 54 unchanged estimate.
No shoe dropping?
Some upside test with the S&P past the 1381-mark again and with Europe catching
back right on US equities. INDU on the run with Home Depot beating estimates
biasing.
Risk Off???? What
Risk Off?!
Back to neutral. In
full. Spain and Italy suddenly snapping 6bp tighter. Bunds and Hard Core back to square
1 with the Soft Core still holding tight.
Short squeeze in
European equities in the last hour, overtaking the US.
Bunds closing flat,
Hard Core EGBs still a tick tighter. Soft Core again a little better with Austria
and Belgium closing on new historic lows. EUR swap curve out to 10 YRS now on historic
low with 10 YRS down to 1.655%. France just above 2.055% low.
Periphery mainly
wagged by equities, wagged by US equities. Still missing an own dynamic. Soft
US close will mean soft European open.
Bunds closed at
1,34% (unch), OBLs at 0,37% (unch) and BKOs -0,036% (+0,5), ahead of tomorrow’s
auction, with UST at 1,61% (unch)
Spanish 2s at 3,16%
(-3), 10s at 5,83% (-5). Spanish 2-10s 268bp (-1).
Italian 2s at 2,10%
(-6), 10s at 4,96% (-6). Italian 2-10s 286bp (-1).
EUR eventually
unchanged. Commodities drifting. Can someone please show the REAL way?
Take-away: As Greek
discussions overnight revealed a spat between Europe and the IMF, and given yet
another closing slump in the US, Risk started on a weak footing with Risk
nearing Friday lows, before being ramped up by rumours, showered again and
finally supported by the US opening in negative, albeit tame
manner, before moving into positive territory and taking everything along.
Given the noon despair, the afternoon relief seems…exuberant. Especially as the
US still lead the way.
Outlook for tomorrow:
US close. FOMC minutes shouldn’t surprise. CISCO Q3 tonight. Greece. EZ Sep
Industrial Production should keep tanking, fcst -2% after +0.6% MoM / -2.2%
after -2.9% YoY. Outside that minor European data. Finnish and Dutch Retail
Sales will probably keep showing the Hard Core getting depressed. US Retail
Sales and Biz Inventories (although data might be heavily Sandy-tainted).
European equities
through 50d average levels and nearing 100d: EStoxx 2516/2427 (50d/100d), DAX
7289/7011, CAC 3459/3383, MIB 15715/14934, IBEX 7861/7397.
US: 100d/200d for
INDU 13124/12993, SPX 1403/1381 and NASDAQ 3017/2983, as Apple-challenged (200d
594).
EUR: 100d 1.2635
& 200d 1.2824. Fibo retracement (of May 2011 1.494 & Jul 2012 1.204
down-leg) at 1.273& 1.315. Jul
2012 to Sep rebound levels: 1.231 – 1.247 – 1.261 – 1.274 – 1.291.
Mixed New Issues
supply with non of it especially Risk Adverse, despite the defensive morning
action: Bank of Ireland in Irish covered bonds (the first in 3 years) with an
impressive EUR 1bn 3 YRS at MS +270 (Ireland +100), Hannover Re with EUR 500m
Jun 2043 sub debt at MS +335 and Danish Jyske Bank with EUR 500m 2.5 YRS FRN at
3mE +120. Yield shopping.
Closing
levels:
10 YRS Yields:
Germany 1,34% (unch); Luxembourg 1,47% (-1); Netherlands 1,60% (-1); Finland
1,62% (unch); Swaps 1,66% (-1); EU 1,71% (-1), Austria 1,75% (-3); EIB 1,87%
(-1); EFSF 1,99% (-2); France 2,07% (-3); Belgium 2,25% (-2); Italy 4,96% (-6);
Spain 5,83% (-5).
10 YRS Spreads:
Luxembourg 13bp (-1); Netherlands 26bp (-1); Finland 28bp (unch); Swaps 32bp
(-1); EU 37bp (-1); Austria 41bp (-3); EIB 53bp (-1); EFSF 65bp (-2); France
73bp (-3); Belgium 91bp (-2); Italy 362bp (-6); Spain 449bp (-5).
EUR swap curve 2-5
YRS 46bp (unch); 5-10 YRS 82bp (unch) 10-30 YRS 60bp (+1,0).
2 YRS German BKOs
closed -0,036% (+0,5) and 5 YRS OBLs 0,37% (unch).
Main -1 to 131
(-0,8% tighter); Financials -2 to 180 (-1,1% tighter); Cross +2 to 538 (0,4%
wider).
Stoxx Futures at
2494 / +0,8% (from 2473) with S&P minis at 1385 (+0,8% from 1374, at
European close).
VIX index at 16,2
after 17,7 yesterday same time.
Oil 85,8/108,4
(WTI/Brent) from 85,9/109,5 (-0,2%/-1,0%). Gold at 1730 after 1731 (-0,1%).
Copper at 349 from 345 (+1,2%). CRB at EU COB 292 unchanged.
BDIY, up again,
this time to 985 from 965 (+2.1%), 4-digit back in sight.
EUR 1,272 from
1,271
Greek guesstimate: Greek bonds reacting oddly
again, softer in the morning, spiking at noon, closing tighter: 17.75%for 2023s
and 2042s 25 down 25 bp to 15.0%. Then again, daily turnover is in single
millions, no more.
All levels COB
17:30 CET
Fast-forward
Macro and Events:
Looks patchy
data-wise. EZ Industrial Production tomorrow to get serious, as well as US
Retail Sales and Biz Inventories. Preliminary European Q3 GDP figures on
Thursday. US IP on Friday.
EZ: Wed IP fcst
-1.8% MoM after +0.6%; Thu 3Q GDP estimate fcst -0.2%, ECB monthly report, CPI
fcst 2.5%; Fri Cars
GE: Thu Q3 GDP fcst
+0.1% after +0.3% QoQ
FR: Wed CPI fcst
2.1% after 2.2%; Thu Q3 GDP fcst flat unch
Italy: Thu Q3 GDP
fcst -0.5% after -0.8%
Spain: Thu Q3 GDP
fcst -0.3% unch
US: Wed PPI fcst
+0.2% MoM after +1.1% Ex +0.2% after 0%, Retail Sales fcst -0.1% after +1.1%,
Ex +0.3% after +0.9%, Biz Inventories fcst +0.4% after +0.6%; Thu CPI, Empire
MfG, Philly FED & Claims; Fri IP and Capacity Utilization.
Click
link under title or below for today’s musical support:
Way...odd.
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