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

Tuesday 3 April 2012

02 April 2012 – “Its Just a Song about Ping Pong” (Operator Please, 2007)

02 April 2012 – “Its Just a Song about Ping Pong” (Operator Please, 2007)

Asia about unchanged overall, too, despite better than expected figures. Chinese official PMI at 53.1 (versus 50.8 fcst after 51.0). Japanese Tankan on the weaker side of expectations. Europe opening about flat to Friday close. Had a strange open anyway. Periphery debt roared ahead with Italian and Spanish 10 YRS roaring ahead 10 bp, while Bunds were falling like a stone. Had then a bit of an instant equities sell-off id morning with no clear reason to be found.
Eventually it seems that some rehashed news about the BuBa not accepting bailed-out sovereign collateral went viral. The fact that the BuBa denied this story and did confirm that it was still accepting these didn’t really lead to a real rebound. Damage done. Most equity markets then in negative territory with Italy and Spain down about 1.5% and their govies giving back most gains. Bunds up to marginally negative levels by mid-afternoon, having traded up 1.86% (from 1.79% close). Commodities split with weaker energy, but ok metals.

Not much to extract from these trading patterns, outside that markets remain accident-prone and on the rather nervous side.

Raft of European PMI figures (Italy better, France worse, Germany a tick better than expected). Overall EU PMI picture confirmed at 47.7 (as fcst). EZ unemployment at 10.8% (after 10.7%), highest since Feb 2008 low at 7.3%. Matching 1997 levels.

Weekend public sector wage hikes of 6.3% in Germany will have the Bundesbank and the ECB shriek (then again CPI spike at 2.9 in Sep / Oct 2011, Mar record unemployment at 6.7%).

Unexciting sovereign supply out of Germany with EUR 3.3bn 6m bills at 0.07% and the Netherlands (EUR 1.1bn 3m at 0.01% and EUR 1.1bn 9m at 0.07%). In order to round up the picture: French bills for EUR 7.4bn in 3, 6 and 12m at 0.09%, 0.13% and 0.27%. All a bit wider than previously.
Half of Greeks foreign-law bonds have not agreed to any voluntary exchange to date. Next maturing issue are EUR 450m on 15 May.

US figures maybe a bit on the low side, but nothing wild either. Feb construction spending lower than forecasted. ISM Manufacturing a bit better 53.4 (after 52.4 and 53 fcst), Prices Paid at 61 (after 61.5 and 63 fcst). Not enough to keep US equities below water. On the contrary, bit of a lift to European stocks, once NY turned positive. Bounced up, like it traded off. Ping pong. Actually crawling to close up nearly 1%, better than credit or the periphery.

New issues (at least for today) already on egg hunting expedition.

ECB deposits down EUR 7bn to EUR 779bn. Once more no SMP (periphery govies) buying by the ECB. On the contrary, stock lowered by Greek bond redemption.
VIX trading over 16 (!) at the open after 15.5 close on Friday. Back to 15.5 at COB EU.
Oil 104.0 / 124.2 (+0.6% / +0.8% from 103.4 / 123.2 WTI / Brent). Gold healthily back up to 1682 from 1663 (+1.1%). CRB likewise positive at 311.0 from 309.4 (+0.5%). Copper more than ok at 390 from 382 (+2%), China follower.
Baltic Dry unchanged at 934! The first day without a rise since the 22 Feb.

10 YRS Yields: Germany 1,8% (unch); Swaps 2,29% (+1); Luxembourg 2,28% (+1); Finland 2,3% (-1); Netherlands 2,3% (-2); Austria 2,82% (+1); France 2,88% (+0); EFSF 2,93% (-1); Belgium 3,36% (-3); Italy 5,09% (-2); Spain 5,33% (+0).

10 YRS Spreads: Swaps 46bp (unch); Luxembourg 48bp (unch); Finland 50bp (-2); Netherlands 50bp (-3); Austria 102bp (+1); France 109bp (unch); EFSF 113bp (-1); Belgium 156bp (-3); Italy 329bp (-2); Spain 353bp (unch).

EUR swap curve 2-5 YRS 49,6bp (+0,3); 5-10 YRS 71,5bp (+0,2) 10-30 YRS 26,2bp (+0,2).

Main 124 (from 125) ; Financials at 220 (from 220); Sovereigns 266 (from 269)
All levels European COB 17:30 CET.

Puh… If it had been for the periphery whiplash, the Bund down-up-down and equities up-down-up, there wouldn’t be anything to write home about. Ping pong markets.
Would be careful given seemingly low volumes. As seen this morning, a 15bp tightening in the periphery and then the same re-widening within 3 hours is far from impossible.

Not even real data to chew on. EZ PPI fcst +3.5% YoY (after 3.7%). Feb Factory orders in the US (fcst +1.5% versus -1% in Jan). FOMC minutes, which might show haggling whether or not to QE3 (?). Spanish unemployment should remain depressing reading.

Click link on title or below for today’s musical support:

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