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 16 April 2012

16 April 2012 – "Something For the Pain" (Bon Jovi, 1995)

16 April 2012 – "Something For the Pain" (Bon Jovi, 1995)

Difficult to make too much sense in the dealings of the start of the week. Asia in line with Friday sell-off in Europe and weak close in the US.

Not much fresh news over the weekend. China widening Yuan trading bands, which would point both to the government’s feeling of the currency having reached some equilibrium and in order to expand its use, as trading and/or reserve currency.

Not much in terms of hard economic data to lean on and to counter the ongoing euro-depression. Contradictory market signals: Italy and Spain got off on the wrong foot with Spanish 10s shooting to over 6.10% and BTPs spiking to over 5.65%. Had nevertheless only a muted Bund reaction and equities were holding rather well (including the periphery).

Belying the recovery of Southern Europe in the afternoon on the back of stronger US futures and European bourses, Credit remained heavy.
US retail sales much better than expected, Empire manufacturing much worse.

Equities better thereafter. Lifting the periphery. Credit nearly unchanged weak. Understand who wants…
Financials not even profiting from a rating review respite by Moody’s, which postponed some reviews to May (for better or worse?). Italian banks were due this week, Spain’s next week. Still having the rest of Europe’s banking (Germany, France, Benelux, UK) in the week of May 7th and 14th.

Had uneventful sales of Dutch 3 and 6m bills, as well as France selling a total of EUR 7.9bn in 3, 6 & 12m bills at a tick better than before.

New issues market on hold.

Eventually, risk appetite for the Periphery and squeezy equities couldn’t really outweigh heavy credit indices and everything slumped back. Wobbly close, but in equities. Failed recovery is probably as bad as the initial move wider.

Quite inconclusive session, but the pain of the Periphery starts to feel. Political ping pong on ECB action, broader scope just starting. Get ready for some more.

10 YRS Yields: Germany 1,72% (-1); Luxembourg 2,19% (unch); Finland 2,23% (+2); Swaps 2,21% (unch); Netherlands 2,25% (+3); EFSF 2,90% (+4); Austria 2,94% (+3); France 3,01% (+7); Belgium 3,42% (+4); Italy 5,58% (+6); Spain 6,04% (+8).
Spanish print over 6.10%, back through 6% and back out wider…

10 YRS Spreads: Luxembourg 47bp (+1); Finland 51bp (+3); Swaps 50bp (+1); Netherlands 53bp (+3); EFSF 118bp (+5); Austria 122bp (+4); France 129bp (+7); Belgium 170bp (+5); Italy 386bp (+7); Spain 433bp (+9).

EUR swap curve 2-5 YRS 48,1bp (+1,2); 5-10 YRS 71,3bp (-1,2) 10-30 YRS 28,5bp (-0,2).
German 2 YRS BKOs close at 0.14% (from 0.13%) and 5 YRS OBLs at 0.67% (from 0.67%)

Main back to 144 (from 143); Financials at 250 (from 247); Sovereigns 280 (from 280).

Stoxx Futures at 2243 / +0,7% (from 2227) with the S&P at 1369 (-0,4% from 1375, at European close).
VIX index tame at 19.6.

EUR 1.307 from 1.308, but tested below 1.30 for the first time since end of Jan before recovering to unchanged.
ECB deposits adding a further EUR 38bn to EUR 743bn, a steep rise into the just started reserve maintenance period. Weekly SMP disclosure shows another empty week... So much for pre-emptively supporting the periphery.
Oil 102,3/118,9 from 103,2/121,4 (-0,8%/-2,1%) . Gold at 1650 after 1665 (-0,9%). Copper at 361 from 361 (-0,1%) . CRB closes 301,0 from 304,2 (-1,1%).
Baltic Dry at 975 from 972.
All levels European COB 17:30 CET

German ZEW (fcst current 35 after 37.6, sentiment 19 after 22.3). IMF release of global growth outlook. US Housing Starts 705k after 698k. Indu Production +0.3% fcst after 0%.
Greek plus Spanish bills.

Rest of week:
Germany: IFO on Fri
France: Running up to first round of presidential elections.
Other EU: House prices in Spain
US: Housing data + Indu Prod on Tue, Claims on Thu, Philly FED & Leading Indicators.
Asia: Nothing really on the plate in China, likewise for Japan. Tue Japan Indu Prod and Capacity Util.

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