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


Wednesday, 2 May 2012

02 May 2012 – "Wipe Out" (Surfaris, 1962)


02 May 2012 – "Wipe Out" (Surfaris, 1962)

After having been arrested for driving blind, oblivious to the overhang of bad news that came out of late, markets got a beating on the last day of April with some serious bashing in European equities, induced by dire Spanish figures and the latter entering in recession, too. The beating was tamer on other risk assets. Italy and Spain were continuing their compression move, in an empty market, leaving the floor yesterday to a strong US market, propelled to a 4 YRS high in the Dow on the back of much better than expected Manufacturing ISM, which by the way was about the only US data beating estimates over the last 10 days.
Given the fact that Continental Europe was all but close and getting further support from growing Chinese PMI data, both official and private (53.3 after 53.1, albeit less that the 53.6 fcst and with HSBC’s flash estimate revised to 49.3), we saw a strong tentative rebound at the open with the Stoxx up 1.75%, trying to retake Friday’s levels.

This major up-wave just didn’t last as a flood of negative European PMI readings brought the whole rebound to a screeching halt. Needless to deepen, which numbers were weak, as it was an all-around situation. We’ll note as well that the Euro-depression is starting to take a toll on others, from Norway to Australia (which lowered rates by more than expected 50 cts to 3.75% yesterday).
Even German figures, and Germany IS running a different course, are running out of steam and unemployment last month didn’t fall as expected, although the rate remains a comfortable 6.8% (after a revised 6.8% from 6.7%). Talking of which, EZ –wide, we’re hitting 10.9% (after 10.8%) with no real end in sight.

After yesterday’s surge in the US, today’s figures were all too weak to keep the party going (ADP employment 119k versus 170k fcst, NY ISM 61.2 after 67.4 – joining a raft of low ISM readings from all FED districts – and Factory orders although down less than expected (-1.5% versus -1.6%, but after +1.3% revised to +1.1%).

Portugal sold EUR 500m 6m bills at 2.935% (after 2.90%) and EUR 1bn 12m bills at 3.91% (after 3.65%).

New Issues, as expected on hold until today, wringing out only some German-speaking Aaa and SSA on the EUR side with EUR 3bn FMS (Germany-guaranteed) 7 YRS at MS +16, EUR 1bn Rentenbank 8 YRS at MS +2 (probably a bit tight compared to FMS) and EUR 500m 10 YRS Austrian public sector covered bonds via Hypo Noe at MS +88.

Excluding the Monday movements in European sovereigns that were far from clear or understandable, the situation tonight shows Germany and the AAA gang taking out ever lower levels with especially  France and Spain on the laggard side, for know reasons, as well as tomorow’s auctions. Italy actually holding in line.
Oh, and remember the last “failed” German 30 YRS auction on 25 Apr with few bids at 2.41%? The bonds are now trading 2.33%...

Having a TV confrontation between polling favourite Hollande and incumbent Sarkozy tonight on French TV. Doubtful that this will bring the world and its problems much nearer to the French voter, given the conspicuous absence of these themes from the election campaign over the last weeks. Hence, the next steps in terms of economic governance, both domestic and European, given the weight of France, will probably only become clear in the coming weeks. Have noted Junker’s frustration with the Franco-German couple. Obviously, a Franco-German couple that was to find new marks wouldn’t ease his job…
Greek vote is next Sunday, too. Obviously, polling doesn’t seem to be permitted, but whatever pops up in the press, doesn’t look rosy with regards to fully-fledged support to the imposed austerity measure / EUR-membership.

10 YRS Yields: Germany 1,61% (-9); Luxembourg 2,09% (-12); Swaps 2,13% (-10); Finland 2,12% (-9); Netherlands 2,18% (-6); Austria 2,73% (-6); France 2,96% (-2); EFSF 2,95% (-11); Belgium 3,28% (-6); Italy 5,53% (-11); Spain 5,82% (-3).

10 YRS Spreads: Luxembourg 48bp (-3); Swaps 53bp (-2); Finland 52bp (-1); Netherlands 58bp (+2); Austria 112bp (+2); France 135bp (+6); EFSF 134bp (-2); Belgium 167bp (+3); Italy 392bp (-3); Spain 422bp (+6).

EUR swap curve 2-5 YRS 45,4bp (-4,8); 5-10 YRS 76,5bp (+1,9) 10-30 YRS 33,2bp (+3,4).
2 YRS German BKOs closed 0,08% (-2) and 5 YRS OBLs 0,57% (-7).

Main at 140 from 140 (unch); Financials at 239 after 245 (-2,6%). SovX at 275 from 275. Cross at 642 from 654.

Stoxx Futures at 2253 / -1,7% (from 2293) with the S&P at 1402 (+0,1% from 1400, at European close). Notre that France in Gallic pride is up 1% against the trend today.
VIX index at 17,2 after 16,2 Friday same time.

EUR 1,316 after 1,326                                                                                                                    
ECB deposits at EUR 789bn after EUR 793bn.
Oil 105,3/118,1 (WTI/Brent) from 104,2/119,5 (+1,0%/-1,2%). Gold at 1652 after 1655 (-0,2%). Copper at 378 from 377 (+0,3%). CRB closes 305,3 from 303,3 (+0,6%).
Commodities slightly uneven to unchanged firmer compared to Friday.
The Baltic Dry fell 0.3%  to 1149 today. It peaked at 1156 last Friday, then closing 1155 Mon and 1152 Tue. First 3-day slide since bottoming out early Feb and sliding just a little mid Feb. Since then it had become a one-way street until this week. Then again, rates about doubled from the through. Still, the 12m average is just shy of 1400 (1394).
All levels European COB 18:25 CET (compared to Friday 15:00 CET)

Rest of the week:
Thursday will be action-packed with auctions both in France and in Spain and then ECB. EZ PPI fcst 3.4% (after 3.6%), knowing that past inflation data in Europe has rather negatively surprised to the upside, which doesn’t help the ECB.
Last French 10 YRS auction level was 2.98% last month. Spanish 5 YRS came at 3.38% in March.

Very, very thin data flow until Friday’s US payrolls. Subject to all what comes up.

Friday further Services PMI round across Europe.


Click link on title or below for today’s musical support:
http://www.youtube.com/watch?v=W5D07c0dJuQ

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