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


Friday, 1 June 2012

01 Jun 2012 – " Back to Black" (Amy Winehouse, 2007)

01 Jun 2012 – " Back to Black" (Amy Winehouse, 2007)
http://youtu.be/ebf171vP74k

Pretty much a repeat of yesterday’s start. Markets opening close to home after US closed only marginally negative and off lows. Asia mixed to negative with Japan taking the brunt of the Yen upwards pressure, managing to get a rebound of 78 against USD and shy of 97 against the EUR after forcefully voicing official displeasure with the attained levels. Chinese PMI readings lower than expected with official number just above expansion at 50.4 (fcst 52 after 53.3) and HSBC reading down to 48.4 after 49.3. Might keep hopes afloat for some official stimuli (China closing about flat).

European mildly positive open with equities up 0.5% from COB, credit down a tick, but rates still rather bid throughout 10 YRS EGBs. EUR hovering on 1.2350 (after having retested yesterday’s 1.232 lows overnight).

Again not much to chew in terms of European data, except tons of Final PMI readings that all remind the rather bleak picture, although the overall was corrected to 45.1 (Flash was 45 after 45.9 in Apr) on German and French numbers revised slightly higher.  Still, the overall picture shows weakness spreading and the mood hit H1/2009 levels. As for China, numbers also start to show contagion outside the EZ (Switzerland, Sweden, the Czechs). EZ Unemployment stable at 11% after Mar revised up to 11% (from 10.9%).
So back to gloom and reversal of the mood to negative.
You know the drill… Bunds down to new low at 1.16% (-5bp) , BKOs trading at negative yield, very strong Soft Core EGBs down to new historic lows ( 7 to 12bp for the Dutch) and the periphery trading softer (+5) with Spain hitting 545 to Bunds. S
panish regions said to be on track with their budget (deficits), but funding solution unclear until next week.

Lunchtime Blues on equities, adding a further 1% to the slide.
Had contingency-aware BBG system testing on Drachma crosses [XGD Crncy GREEK DRACHMA (POST EURO) Spot], which visibly did the rounds, before BBG retrieved it again (Press relates the BBG help desk as “an internal function which is set up to test”). Anyhow. The old GRD ticker still exists, but so do DEM, FRF and the other legacy currencies. Had Berlusconi propose to force EUR printing or leave – or have the Germans leave (Ticker ITL Crncy)...

US Big Friday with huge Non Farm payrolls miss at +69k (fcst 150k after 115k) and past data revised to +77k. Unemployment rate grinded higher to 8.2% at (fcst 8.1% unchanged). Personal income a tad lower to 0.2% (fcst 0.3% after 0.4%) and Spending likewise only to 0.2% (fcst 0.3% unchanged) with prior down to 0.2%, as well.
Good for another 0.75% in equity slide. Credit wider, but not immensely, although financials back over 300 again. Oil trashed with Brent trading below 100-mark for the first time since Oct 2011.
Bunds new low at 1.13%. German Schätze now trading -0.01%.

France catching back in the finish on the Dutch sprint started in the morning and overtaking the latter with yet another 20bp move, taking the Soft Core along. Austria and later France fast nearing the 2% mark in 10s. France back to through 100-mark to Bunds. Spain mostly treading water.

Final US MAY PMI reading (new data set) at 54 (Flash 53.9). The data week ended with last estimate misses of Manu ISM at 53.5 (fcst 53.8 after 54.8) and Construction Spending at 0.3% (fcst 0.4% after 0.1% MoM). Huge drop in Prices Paid ISM at 47.5 (fcst 57 after 61). Then again, at these depressed levels, it didn’t really matter anymore, because there’s just so much damage that can be done in a week.
Belated catch-up in BTPs, ending the day as star performer.... (Probably misplaced) SMP buying hopes (, as long as things are no clearer.).

The only one profiting for a while was actually the (record-shorted) EUR, which profited from weak US figures to sharply spike back from the 1.234s to 1.245 before dropping back.
Oh!, and Gold did shine nicely and hurdled back the 1600-mark, up 3%, because one never knows when the next LTRO / QE or other operation might pop up.
 

Was wondering yesterday about the sense of “Controlled Panic” and felt something had to yield. Equities did. Outside that, everything seems all over the place... Markets on Visual Flight Rules.

Blank new issue screens.

Greek bonds guesstimates: Greek bonds sinking about stable with polls contracting one another: 2023s softer at 30.50% and 2042s back to 25.5% yesterday. 2042s fast approaching a single digit price quote.
Quotes were 20.25% and 16.75% before the elections.

Closing levels:
10 YRS Yields: Germany 1,17% (-4); Netherlands 1,52% (-9); Finland 1,53% (-6); Luxembourg 1,60% (-3); Swaps 1,66% (-2); Austria 2,06% (-13); France 2,23% (-13); EIB 2,33% (-2); EFSF 2,47% (-3); Belgium 2,80% (-15); Italy 5,71% (-19); Spain 6,46% (-7).

10 YRS Spreads: Netherlands 35bp (-5); Finland 36bp (-2); Luxembourg 43bp (+1); Swaps 48bp (0); Austria 89bp (-9); France 106bp (-9); EIB 116bp (+2); EFSF 130bp (+1); Belgium 163bp (-11); Italy 454bp (-16); Spain 529bp (-3).
Had Austrian 10s trade below 2% for a while, and France under 100 to Bunds. Spain finally through 6.5% in the close. Dutch trying to steal the Finn’s 2nd place on the roster, knowing that the former’s 10 in my figures in an interpolation in absence of a 10 YRS benchmark.

EUR swap curve 2-5 YRS 30,7bp (+1,1); 5-10 YRS 49,3bp (-2,6) 10-30 YRS 15,3bp (-1,5).
2 YRS German BKOs closed 0,01% (+0) and 5 YRS OBLs 0,32% (-3). 2s traded -0.01%
German 2s still cheap compared to 2 YRS Swiss trading at -0.34%... Then again, there’s the CHF...

Main at 184 from 180 (2,1% wider); Financials at 302 after 299 (just 1,0% wider). SovX at 330 from 325. Cross at 736 from 722.
Credit actually holding rather ok, across all classes, given the beating.

Stoxx Futures at 2066 / -1,8% (from 2103) with S&P minis at 1284 (-1,1% from 1299, at European close).
VIX index at 25,8 after 24,8 yesterday same time.
Dow Jones slipping into negative territory for the year (S&P still up 2.4% and the NASDAG 6.4%). VIX now over 25.

Oil 83,2/98,5 (WTI/Brent) from 86,6/102,0 (-4,0%/-3,4%). Gold at 1609 after 1564 (+2,9%). Copper at 331 from 336 (-1,2%). CRB closes 269,0 from 273,5 (-1,6%).
Massive beating, especially in Oil, good Gold outperformance.
Baltic Dry down to 904 from 923 (-2.1%). My canary won’t eat, lost colours, doesn’t tweet…

EUR 1,238 from 1,235
ECB deposits at EUR 769bn after EUR 770bn.
Very stable ECB deposits lately. Seems that we have found cruising speed here.

All levels European COB 17:30 CET

On the week (compared to Fri 25 May close):

Bitter week for the Periphery, which had already ended the previous week on a sad “Mala Vida” note, started Monday with a strong flamenco-style “Foc”. Tuesday was sunny and calmed and markets went surprisingly “Relax”, which couldn’t hold as markets played havoc with the periphery debt with “Il Commendatore” demanding repentance. Thursday we asked “Bass (How low can you go?)” on yet another record low in EGBs (ex Periphery) and USTs. Obviously, there still was room to the downside as we close another RISK OFF week on a saddening “Back to Black”.

And the winner of the week is? France for a while with 38 points on the week at midday, but still down 29 bp on the week, together with Holland and Austria, as well as Belgium. Looser Spain and Italy.

10 YRS Yields: Germany 1,17% (-20); Netherlands 1,52% (-28); Finland 1,53% (-23); Luxembourg 1,60% (-21); Swaps 1,66% (-19); Austria 2,06% (-27);France 2,23% (-28); EIB 2,33% (-21); EFSF 2,47% (-22); Belgium 2,80% (-25); Italy 5,71% (+6); Spain 6,46% (+17).

10 YRS Spreads: Netherlands 35bp (-7); Finland 36bp (-3); Luxembourg 43bp (-1); Swaps 48bp (-1); Austria 89bp (-6); EFSF 130bp (-2); EIB 116bp (0); Belgium 163bp (-5); Italy 454bp (+27); Spain 529bp (+37).

EUR swap curve 2-5 YRS 31,3bp (-5,8); 5-10 YRS 49,3bp (-10,6) 10-30 YRS 15,3bp (-3,8).
2 YRS German BKOs closed 0,01% (-4) and 5 YRS OBLs 0,32% (-13), on the week.

Main at 184 from 174 (5,4%); Financials at 302 after 297 (1,8%). SovX at 330 from 316. Cross at 736 from 717.
Aint that bad after all...

Stoxx Futures at 2066 / -4,1% from 2154 with S&P minis at 1284 / -2,7% from 1320, at European COB last week.
VIX index at 25,8 after 22,1 last week.
Dow Jones slipping into negative territory for the year (S&P still up 2.4% and the NASDAG 6.4%) (FB down 26% from IPO and 33% from high)

Oil 83,2/98,5 (WTI/Brent) from 91,0/106,8 (-8,7%/-7,8%). Gold at 1609 after 1567 (+2,7%). Copper at 331 from 345 (-4,0%) . CRB closes 269,0 from 282,1 (-4,6%).
Massive beating, especially in Oil, good Gold outperformance.
Baltic Dry fixed at 904 from1034 last week ( -12.6%) and 1141 the Friday before (-20.8%).

EUR 1,238 after 1,253 last Friday

Next week:
Will need to live with patchy liquidity with the UK in extended weekend on Mon and Tue. Government supply rush starting again with Spain testing a sale of 2022s on Thu, as biggest test of the week. ECB on Wed.
Not really tons of data.

Germany: Tue Fact Orders (fcst -3.8% after -1.3%) & Service PMI, Wed IP (fcst 0.8% after 1.6% YoY), Fri Import / Export & trade balance
France: Tue Service PMI, Fri Biz Sen
EZ: Mon Sentix Investor JUN Conf (fcst -30 after -24.5), EZ PPI, Tue Comp PMI (fcst 46.5 unch), Retail Sales, Final Q1 GDP, ECB
Periphery: IT Service, Fri IP, PMI SP Mon Unemployment, Tue Ser PMI, Wed Ind Output
US: Mon Fact Orders (fcst 0.3% after -1.5% revised to -1.9%), Comp ISM May (fcst 53.8 after 53.5), Wed MBA mortg a Q1 Productivity, Thu claims, Fri Inventories.

Click link on title or below for today’s musical support:
http://youtu.be/ebf171vP74k
(So sad...)

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