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

Thursday 10 May 2012

10 May 2012 – "You Spin Me Round" (Dead or Alive , 1984)

10 May 2012 – "You Spin Me Round" (Dead or Alive , 1984)

Repeating patterns. US closing down, but off lows, Asia hanging in there bravely, waiting for the next sandal to drop inEurope. European equities trying to lurch on, following their late rebound, but failing to do so on the second rebound and testing the downside by noon, although off yesterday’s low by noon.
Chinese trade data showing euro depression impact with exports only +4.9% (fcst 8.5% after 8.9%) and imports grinding to a halt at +0.3% (fcst +10.9% after +5.3%), resulting in a ballooning trade balance. Need to check how the Baltic Canary will react in the coming weeks.

French biz sentiment unchanged and as forecasted at 95. Industrial production and manufacturing beating forecasts and with Feb figures revised upwards (respectively -0.9% and -0.3% YoY after -1.4% and -3.2%). Other figures showed a surprisingly weak Finnish economy (IP -5.7% nsa), Spanish housing transaction down -22.7% YoY (after -31.8% prior), the 13th monthly decline in a row. Italian IP better than expected, but still down -5.8% YoY. Greek IP -8.5% after -8.3% and unemployment stable at 21.7%. Greek youth unemployment an untenable 53.8%.

Had the EFSF transfer EUR 4.2bn to Greece, nevertheless. Had Syriza passing the baton of trying to form a government in Greece to the Pasok. Had the Olympic Flame lit despite all. Will travel Greece for the next 8 days. Should have probably new election dates by then... Spin the bottle…

No European government supply (for once).
Not much in EUR New Issue land. Sweden getting strong demand for its USD 2.25bn 3 YRS issue at MS -19 and UBS placing its own signature via a 2 YRS FRN to the tune of EUR 750m at 3mE +60. Had as well Slovakia raising USD 1.5bn 10 YRS at UST +262.

Nothing good. Nothing too bad either, after all. Hence rather sideways into lunchtime after the ups and downs. 10 YRS govies about unchanged in Europe. Equities slightly lower. Credit again slightly wider.
Just ahead of the US figures, European equities had pared their losses, the periphery came done 5 bp and credit tightened a little. Bunds, of course, softer from 5 to 10s. Nothing very specific to note, but absence of follow-up downside pressure.

US March trade deficit at USD 51.8bn near the highest levels seen last summer and early this year (USD 50-52bn range). Second highest since USD 52.5bn in Jan 2012. Before that levels seen between 2004 and ending with a bang post-Lehman to hit - USD 25bn in May 2009. But that’s more historical data trivia in reality. EUR/USD traded anywhere between 1.20 and 1.60 during that same period… 5.2% rise in import against 2.9% exports.
Must be those iPads. And oil, before the slump (Mar average was 107 for WTI… Jobless claims about in line with forecast with the now usual upwards revision of prior data. Doesn’t seem to spoil the mood.

Happy and positive session for most of the afternoon: moderately growing risk appetite– in absence of any low-flying shoe today…But then again, no visible presence doesn’t mean there’s no risk. Ouch, those shoes!
Spain quietly ticking below 6% and Italy down to 5.50%. Sure, just numbers, but better than testing the upside further. Which will happen, as soon as something drops out there.

In the meantime, Luxembourg’s 10s, albeit an infrequent borrower, which just that small 2022 to check-out, is closing at a historic low off 1.99%. Same is true for Finland at 2.01%, although there’s no on-the-run 10s (so I follow an interpolation). Given the low funding needs and alternative currencies used this year (USD, GBP), we might actually not see any new reference for a while, helping to make what’s left even dearer.
More to the point and probably more followed, plain and simple EUR 10 YRS swaps have traded a new historic low at 2.045%. As the EIB is brought back more and more into the discussion on growth issues, I’ll paste that one into the report, too.

Greek bonds now probably 24% and 18.75% (in yield), up another 50 bp. Quotes were 20.25% & 16.75% last Friday.

Closing levels:
10 YRS Yields: Germany 1,54% (+2); Luxembourg 1,99% (-3); Finland 2,01% (-4); Swaps 2,05% (-1); Netherlands 2,08% (-4); Austria 2,63% (-4);  EIB 2,70% (-3);France 2,81% (-4); EFSF 2,88% (-1); Belgium 3,18% (-5); Italy 5,50% (-9); Spain 5,95% (-10).

10 YRS Spreads: Luxembourg 45bp (-5); Finland 47bp (-6); Swaps 52bp (-4); Netherlands 54bp (-6); Austria 109bp (-6); EIB 116bp (-5); France 127bp (-6); EFSF 134bp (-3); Belgium 164bp (-7); Italy 396bp (-11); Spain 441bp (-12).

EUR swap curve 2-5 YRS 40,4bp (+1,2); 5-10 YRS 68,9bp (-0,8) 10-30 YRS 28,2bp (-2,8).
2 YRS German BKOs closed 0,07% (unch) and 5 YRS OBLs 0,55% (+1). Don’t think we had new lows today. Maybe this morning. Whatever...

Main at 156 from 157 (-0,6%); Financials at 264 after 267 (-1,1%). SovX at 283 from 285. Cross at 685 from 696. Not exactly a roaring recovery.

Stoxx Futures at 2218 / +1,4% (from 2188) with the S&P at 1360 (+0,8% from 1348, at European close).
VIX index at 19,7 after 20,7 yesterday same time.

EUR 1,296 after 1,295
ECB deposits down to EUR 696bn after at EUR 823bn (- EUR 127bn). Drop in the continuity of prior end of reserve maintenance periods.

Oil 97,1/112,7 (WTI/Brent) from 96,1/112,2 (+1,0%/+0,5%). Gold at 1596 after 1589 (+0,4%). Copper at 370 from 364 (+1,6%). CRB closes 295,3 from 293,5 (+0,6%). Ok, better, but not roaring either...
Baltic Dry going into reverse at 1146 from 1156 before. Ah? China data?
All levels European COB 17:30 CET

Germany: CPI
France: Biz sentiment
EZ: EU commission growth forecast
Other EU: Spain CPI, Italy to raise a chunky EUR 10bn in bills (EUR 7bn 12m and EUR 3bn 3m)
US: PPI and U Michigan Fri.
Asia: Chinese data flow mainly on Thu & Fri (Trade balance, IP, Retail Sales). Japan likewise empty until end of the week.

Click link on title or below for today’s musical support:
( Stock Aitken Waterman What a producing machine…)

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