06 Dec 2012 – “ Magic Carpet Ride ” (Steppenwolf, 1968)
Strong start in Risk to take out
new 2012 highs in Equities and trying to retrace near 2012 Credit lows, too. Core
EGBs cool. Bunga Square’s rug pulling scuttled all that easy living by noon,
weighting on the Periphery and boosting Core EGBs. ECB gloomy. Equity – bond divergence
not a flyer yet, though… US sideways and Risk Watchers back to scanning
European politics. EUR falling off the carpet.
"Magic Carpet Ride" (Bunds 1,29%
-6; Spain 5,46% +8; Stoxx 2605 +0,6%; EUR 1,297 -100)
---
Lather.
Rinse. Repeat. Bla bla bla. Snore. US had a split close, mostly
due to Apple’s biggest slide in 4 years (down $37 or 6.4%), for which no one
seems to be able to pinpoint a definite reason, outside definitively more
sellers than buyers (and that is in good volumes and a final 2.5% dunk in the
closing hour).
Performance has been that outrageous that
we need to crawl back in time to find some chart points. $525-530 and then 506
(that was 3 weeks ago, thinking of it…). If we take the low of the latest
(relative) weak patch in Nov 2011 at 364 as base and 21 Sep 2012 705 high, we
end with a 50% retracement at 534, pretty much where we are now, then 494 and
444. 50g average at 605 catching up on 200d at 601. Suit yourself.
Rather uneventful Asian session, mostly up,
but for China,
paring a little bit of Wednesday morning’s surge.
Note, anecdotally, or not, that despite promises of
5% GDP growth (and tons of inflation), 10 JGBs closed on a historic low (as so
many) of 0.69%, which shows how much trust there is in the promised reflation
attempt.
Note, too, that S&P considers the Greek
buy-back as a Selective Default and downgraded it to SD from CCC. But with next
to no private ownership in the future and the OSI obviously intending to
mark-to-market Greece
at 100 (until it stops to do so), who should still care?
Now usual (slight) European Risk On start with European equities
catching up on the US
close (+0.3%). Credit the usual 1-2 tighter open.
EGBs flattish to a tick softer, after
yesterday’s strong close. Bunds unchanged at 1.34% (UST 1.59%). Curve
unchanged. Periphery bonds open a bit stronger (after yesterday’s 15bp widening
in BONOs, given the rather botched auction).
EUR a tick softer at 1.305 with Commodities
trading sideways, having slid from 1.308 in Asian trading. Gold unchanged, caught
below 1700.
Waiting
for Super-Mario show after lunch. Then for the NSF. Then for the weekend. Then
for Xmas. Then for Year End. Mayan calendar permitting…
French Q3 unemployment better than expected
at 10.3% after 10.2% (fcst 10.5%) with Mainland staying below the (expected) 10%-mark
at 9.9% (up from 9.7%, rev. 9.8%). 29k added (after 65k). Then again, a lot of
firings have been postponed from the election period, past the summer, but are
on-going in Q4. So that 10% will eventually be flashed.
Bit of a sportive sprint to hit once more
the +1%-mark in equities, taking out yesterday’s highs and printing a new 2012
high at 2618. As pointed out yesterday, the Sep intra-day high was first taken out at
2608 to hit 2610 in
EStoxx. 2611 was the 2012 intraday high of 16 Mar, broken to the downside in
Aug 2011. 3068 remains the post-Lehman high of Feb 2011), so there still is a bit
of room there (some 18%)…
Credit overdoing the move with Main 2.5%
tighter by mid-morning and financials even 4.5% tighter (passing the mid Oct
low at 153 and now back May 2011 levels).
Q3 GDP confirmed -0.1% QoQ / -0.6% YoY, as
expected. EZ Household consumption in Q3 actually holding better than expected
at flat QoQ (fcst -0.2% after -0.2%, albeit with Q2 revised to -0.4%).
Greek Unemployment hitting 26% in September
from 25.3%.
German Factory orders hopping above
consensus with +3.9% MoM (fcst +1% after -3.3%, rev. -2.4%). YoY nsa still down
2.4%, but better, too (fcst -5.6% after -4.7%, rev. -3.9%). At least this still
works in Europe…
The modestly-sized EUR 4bn French OAT
auction to end French long end supply for the year went through in style with EUR
1.4bn at 1.010% for the 4.25% Oct 2018 (COB 1.015%), EUR 1.7bn at 1.270% for
the 3.75% Oct 2019 (COB 1.285%, last auctioned at 1.39% one month ago) and EUR
900m at 2.560% for the 2.75% Oct 2027 (COB 2.565%). No real comparable past
auctions. Suffice to say that this auction was dealt at historical lows. In
comparison, last month’s 10 YRS auction was at 2.22% (closing again at 1.99%
today).
New Issues in covered bond format from
Australian NAB for EUR 1bn 10 YRS at MS+ 37 and Société Générale for a big EUR
1.5bn 5 YRS at MS +25. Unrated Air France issued EUR 500m at 6.375% in
long 5 YRS (ca. MS +557).
Hypo Alpe Adria issued EUR 1bn Tier 2, guaranteed
by Austria,
at MS +82 / +70 over the RAGB.
Periphery getting a big hit by late morning
with 2 YRS Italians over 10 wider to 1.88% and both 10 YRS suddenly widening
5bp to the symbolic 4.50% for Italy
and 5.43% for Spain.
Trigger being Il Cavaliere’s
intention to scuttle a non-confidence vote in Parliament with his party
unwilling to support Monti’s growth plan. Bunga Square pulling the rug…
Ah. Periphery headline risk in a quiet
market. Hadn’t had that for a while. Too much complacency out there of late…
Thought everything was fine, now, and that
we had left the Crisis behind us.
Whoa!
Violent movement, scuttling ROn by
midday.
Equities back to up a quarter (down 0.75%
from the top), Credit snapping back to unchanged.
Bunds a tick tighter, Hard Core flat, Soft
Core +3 (There goes the sub-2% for France again). Periphery getting a
huge slap with Italians soaring 20bp (nearing the symbolic 2%-level), pushing Spain
past 3 in
2s and past 5.50% in 10s.
Bunds 1,33% (-1), OBLs 0,35% (-1), BKOs
-0,012% (-0,7). UST 1,58% (unch).
Spanish 2s at 3,02% (+11), 10s at 5,51% (+13).
2-10 YRS spread 249bp (+2).
Italian 2s at 1,97% (+20), 10s at 4,57%
(+12). 2-10 YRS spread 260bp (-7).
EUR and Commodities barely changed.
BoE unchanged. ECB unchanged. Periphery
getting a little calmer, but will remain cautious on Bunga Square Scare (BSS).
US Claims to kick-start the afternoon in a
more positive spin at 370k (fcst 380k after 393k, revised 395k) and Continuous
Claims at 3205k (fcst 3275k after 3287K, rev. 3305).
Ok, en route for tomorrow’s NFP (fcst +86k
after +171k) with Unemployment expected to remain stable at 7.9%. Will need to
check Household employment and government jobs, the late engines for the
improved situation.
Super-Mario show a bit tired with not much
in terms of crisp news (and, then, where from?). Inflation to fall below 2% next
year. Growth beurgh until the end of 2013. A rate cut has been
discussed – and shelved (Always keep the
Hope alive). Negative rates? Bof, to be seen (Never say never). Oh, and someone even asked about the OMT? Yeah, do
you remember? Conditionality & Support. Anyone
seen the Loch Ness monster lately?
Whatever, the whole thing didn’t have much
of an impact with levels before and after the press conference by and large the
same and markets readying up for the US open – and the now-accustomed FCDRE and
Apple-jelly movements.
Periphery bonds recovering from their
initial shock, step by step. BSS
looming, though…
US cash open on the flatter side. Like flat
flat flat. Like a carpet flat.
EGBs maintaining their momentum on the
gloomy ECB outlook (not a surprise, though), fickle equities on their highs and
fickle Periphery.
Still, equities managing to shake off the
Periphery stress and arcane Italian politics and concentrating on trailing US
stocks tick for tick, yet again in total sync compared to yesterday’s close.
Strong tightening move in agency paper,
which had lagged EGBs a little, flat to, or even outperforming Bunds, and definitively
leaving the Soft Core behind today. EIB zooming in on Austria. Soft Core caught
in-between and eventually unchanged, or just a tick better. Then aagin, new
lows everyday…
Periphery damage about under control with
Spain closing well off-wides, but Italy shaken (not stirred).
Bunds closed at 1,29% (-5), OBLs at 0,30%
(-6) and BKOs -0,051% (-4,6). UST at 1,57% (-1) COB. Short end of both back
below 2%, respectively 3%-mark.
Spanish 2s at 2,95% (+4), 10s at 5,46% (+8).
2-10 YRS spread 251bp (+4).
Italian 2s at 1,91% (+14), 10s at 4,58%
(+13). 2-10 YRS spread 268bp (+1).
Greek bonds balancing out near buy-back mid
prices at 39.00 (+50 ticks) and 30.50 (flat).
The EUR didn’t like the Magic Carpet Ride
and the return of political instability in Italy, as well as the 1.28 2013 ECB
outlook, as well as the failed attempt to break 1.315 yesterday and took a dive
from noon on. Magic Carpet stalling.
Oil is down 2%, Gold back to 1700 (+0.7%) and the rest trailing sideways.
Credit indices still seem to attempt taking
out new lows for the year (Main 112 in March, today 115 before bounce back;
Financials hitting 146 past the Oct 153 point; Cross low 462 mid Sep, 468
today).
Highs were respectively 208 & 184 in Nov 2011 and then May 2012 in the Main,
355 & 309 for Financials and 842 & 753 for the Crossover. So we’ve come
some way here, too.
Take-away: Strong start in Risk to take out
new 2012 highs in Equities and trying to retrace near 2012 Credit lows, too. Core
EGBs cool. Bunga Square’s rug pulling scuttled all that easy living by noon,
weighting on the Periphery and boosting Core EGBs. ECB gloomy. Equity – bond divergence
not a flyer yet, though… US sideways and Risk Watchers back to scanning
European politics. EUR falling off the carpet.
Outlook: Periphery. Fiscal Cliff. Apple.
Etc. Ok, en route for tomorrow’s NFP (fcst +86k after +171k) with Unemployment
expected to remain stable at 7.9%. Need to check Household employment and
government jobs, the late engines for the improved situation. Michigan Confidence
fcst 82 after 82.7.
European 50 & 100d averages: EStoxx
2512/2473, DAX 7274/7140, CAC 3454/3434, MIB 15561/15210, IBEX 7811/7562.
US 50, 100 & 200d averages: INDU
13162/13149/12997, S&P 1418/1411/1386, NASDAQ 3012/3022/2988 with AAPL at
605/624/601.
EUR: 50d 1.292, 100d 1.273 & 200d
1.279. Fibo retracement (of May 2011 1.494 & Jul 2012 1.204 down-leg) at
1.273& 1.315, then 1.349 (50%).
Closing
levels:
10 YRS Yields: Germany 1,29% (-5);
Luxembourg 1,39% (-6); Netherlands 1,53% (-3); Finland 1,54% (-4); EU 1,59%
(-5); Swaps 1,59% (-4), Austria 1,72% (-1); EIB 1,75% (-5); EFSF 1,87% (-6);
France 1,99% (unch); Belgium 2,12% (-1); Italy 4,58% (+13); Spain 5,46% (+8).
10 YRS Spreads: Luxembourg 10bp (-1);
Netherlands 24bp (+2); Finland 25bp (+1); EU 30bp (unch); Swaps 30bp (+1);
Austria 43bp (+4); EIB 46bp (unch); EFSF 58bp (-1); France 70bp (+5); Belgium
83bp (+4); Italy 329bp (+18); Spain 417bp (+13).
EUR swap curve 2-5 YRS 44bp (-1,0); 5-10
YRS 81bp (unch) 10-30 YRS 67bp (+3,0).
2 YRS German BKOs closed -0,051% (-4,6) and
5 YRS OBLs 0,30% (-6).
Main -1 to 117 (-0,8% tighter); Financials
-2 to 151 (-1,3% tighter); Cross -7 to 475 (-1,5% tighter).
Stoxx Futures at 2605 / +0,6% (from 2589)
with S&P minis at 1411 (+0,7% from 1401, at European close).
VIX index at 16,5 after 17,2 yesterday same
time.
Oil 85,9/107,0 (WTI/Brent) from 87,9/109,0
(-2,3%/-1,9%). Gold at 1700 after 1687 (+0,8%). Copper at 364 from 365 (-0,3%).
CRB at EU COB 298,0 from 297,0 (+0,3%).
BDIY sliding back through the 1000-mark,
down 3% to 990 (down over 10% in one week).
Xmas
shipping really, really over? When will come the excuse of the upcoming Chinese
New Year (10 Feb 2013).
EUR 1,297 from 1,307
Greek guesstimate:
2023s up 50 ticks to 39 (14.75%) and 2042s unchanged at 30.50 (11.85%). Highs
were Monday with 39% high (14.75% yield) for the 2023s and 30.75% (11.77%) for
2042s. Buy-back price proposal: 38.1-40.1% & 30.2-32.2%
All levels COB 17:30 CET
Fast-forward
Macro and Events:
Looking forward to new week: German Exports
on Mon (somebody has to grow!), ZEW Sentiment on Tue, especially flash PMI on
Fri 14.
Not much pencilled in in exciting
government supply, mostly bills. Some Periphery bonds next Thu.
EC: Tue 11 ZEW Sentiment, Wed 12 IP; Fri
flash PMI
GE: Thu Factory Orders fcst +1% MoM sa /
-5.6% YoY nsa (fro -33% / -4.7%); Friday Industrial Production fcst flat /
-1.5% from last -1.8% MoM/-1.2% YoY; Mon 10 Exports, Tue 11 ZEW Sentiment; Wed
12 CPI; Fri 14 flash PMI
FR: Thu Q3 unemployment fcst 10% after
9.7%; Mon 10 Biz Sentiment, IP, Wed 12 CPI, Fri flash PMI
Italy: Mon 10 IP, Wed 12 final Q3 GDP; Thu
13 CPI; Fri 14 Government Debt
Spain: Wed 12 Housing transactions; Thu 13
CPI, Fri 14 House Prices
US: Fri NFP
Click
link under title or below for today’s musical support:
Last
night I hold Aladdin's lamp / So I wished that I could stay / Before the thing
could answer me / Well, someone came and took the lamp away.
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