10 Aug 2012 – “ Rainbows & Pots of Gold " (Stereophonics, 2003)
Ah. A spoiler: Chinese trade date was a huge unexpected miss for Jul as Exports grew a paltry 1% (fcst 8% after 11.3%) and Imports, too, clocked in at solely 4.7% (fcst 7% after 6.3%). Tough end of the week surprise, although Asian equities took the hit rather coolly, closing down 0.5 to 1%. The US closed about unchanged with the S&P clinging to the 1400-mark, after a 7 tick HiLo session.
European open unsurprisingly in (muted) ROff mode. Equities down 0.75%, Credit much wider (correcting last days’ strength) at 3%. Good 5 bp rush into Core EGBs, a bit less in Softs and the Periphery wider by 5 bp (with about unchanged curves). EUR unchanged and Commodities rather brave, outside Copper down 1.5%. Doesn’t seem to qualify as a shoe dropping, rather a flip-flop, at this stage.
Final German Jul CPI at 1.9% YoY. French IP a miss at flat MoM and -2.3% YoY (fcst -1.8% after prior data revised to -3.7% from -3.5%), likewise Manufacturing down -2.6% (fcst -2.1% after yet again revised lower 3.7% from 3.5%). Not boding well for Q3 – and the French government’s budget plans.
Outside that not much else. Drifting ahead of the weekend with the only US figures being import prices. ROff pushing out credit and equities softer. Some limited contagion to the Periphery. Midday levels: Equities down about 1%, Credit out by 3.5. EUR a touch lower. German 10s at 1.37%, tighter by 8, rest of the pack by 4-6, depending on ranking. Italy and Spain out a couple of bp with about unchanged curves.
Had the Spanish Treasury remind everyone, as already done so mid-July, that next week’s bond auction would be cancelled. Fine, fits.
Greece’s 3m auction next Tuesday on the other hand will be for a chunky EUR 3.125bn (in order to repay the bond redemption at the ECB), which is a size, compared to previous 3m auctions (the largest having been EUR 1.95bn in 2010 and EUR 1.5bn 6m in Jan 2011). Obviously probably a pass-through arrangement between the Greek Treasury /domestic banks / ELA / Bank of Greece / ECB, but that chain better not have any weak link.
Otherwise… No titbits… Nada. Rien. Nichts. Nothing.
For your weekend read, a nicely written piece of economic fiction in this week’s The Economist about Grexit and PICS-it. Somehow echoing former ECB member and EUR architect Issing’s comments (link). EUR yes, EUR components… Uhhh… Pfff…
US import prices surprisingly low and below forecast at -0.6% after revised higher -2.4% MoM and even -3.2% after revised -2.5% YoY.
Nothing major, but confirming pressure / ROff. Commodities open in the US in sync, about 1% lower. And US equities joining half a percentage lower.
Can’t explain the sudden spike out in EUR from a 1.224 LOD back to HOD 1.232 in an hour, before drifting back lower. Helped giving equities some colour, but not Periphery EGBs, which drifted wider, with some additional short end flattening.
Bunds at 1.38% (-7). BKO at -0.077% (-4), as well as strong OBLs at 0.34% (-6).
Italy and Spain out by 5 and their curve 7, respectively 11 flatter again.
Won’t have much to chew on Monday either, as of today, in absence of data flow or major auctions. EUR 8bn Italian 1-year paper on the chop. European GDP data and ZEW on Tuesday.
Wednesday closed in 2/3 of Europe. Hitting summer low point. Beware of patchy liquidity.
New Issues summer and Friday lull…
Closing levels:
10 YRS Yields: Germany 1,38% (-7); Finland 1,62% (-7); Luxembourg 1,65% (-5); Netherlands 1,66% (-8); Swaps 1,81% (-5); EU 1,92% (-5), Austria 2,02% (-4); France 2,07% (-4); EIB 2,11% (-6); EFSF 2,21% (-5); Belgium 2,50% (unch); Italy 5,89% (+5); Spain 6,87% (+5).
10 YRS Spreads: Finland 24bp (unch); Luxembourg 27bp (+2); Netherlands 28bp (-1); Swaps 43bp (+2); EU 54bp (+2); Austria 64bp (+3); France 69bp (+3); EIB 73bp (+1); EFSF 83bp (+2); Belgium 112bp (+7); Italy 451bp (+12); Spain 549bp (+12).
EUR swap curve 2-5 YRS 45bp (-2,0); 5-10 YRS 78bp (-1,0) 10-30 YRS 45bp (+1,0).
2 YRS German BKOs closed -0,077% (-1,6) and 5 YRS OBLs 0,34% (-6).
Main at 149 from 146 (2,1% wider); Financials at 246 after 241 (2,1% wider). SovX at 248 from 242. Cross at 589 from 576.
Stoxx Futures at 2424 / -0,5% (from 2435) with S&P minis at 1396 (-0,4% from 1401, at European close).
VIX index at 15,2 after 15,4 yesterday same time. Still under pressure.
Oil 92,7/112,2 (WTI/Brent) from 93,9/112,8 (-1,3%/-0,5%). Gold at 1623 after 1614 (+0,5%). Copper at 339 from 343 (-1,2%). CRB at EU COB 302,0 from 306,0 (-1,3%).
Baltic Dry on its late daily deep dive, down 2% to 774 from 790. Multi-year low at 647 just 16% away. Given the latest rhythm that’s about a week from now…
EUR 1,229 from 1,229, eventually unchanged.
ECB deposits at EUR 289bn after EUR 278bn.
Greek bonds guesstimates: static at 2023s at 24.25% and 2042s at 20.00%
All levels COB 17:30 CET
On the week (compared to Fri 03 Aug COB):
After last Friday’s market re-think of the ECB pledge and subsequent rally in Risk, Monday saw some slight correction of the assessment, at least in EGBs (Bunds 1,39% -3; Spain 6,85% +8; Stoxx 2400% +1,3%; EUR 1,242), although equities had a field day. Anyway, everyone was curious what’s up there…Came Tuesday, one had to ask about "Life on Mars?" (Bunds 1,47% +8; Spain 6,82% -3; Stoxx 2439% +1,6%; EUR 1,242), as xxx. Wednesday gave some more rebalancing, although in an empty market that was demanding to "Pump Up The Volume" (Bunds 1,43% -4; Spain 6,84% +2; Stoxx 2431% -0,3%; EUR 1,237). Yesterday was again more forcefully optimistic and equities intended to enjoy some more "Beautiful Days" (Bunds 1,45% +2; Spain 6,82% -2; Stoxx 2435% +0,2%; EUR 1,229), despite generally adverse data.
Take away of the week? Hmm… After the trashing last week and the subsequent illuminated recovery, things were more balanced in European Government Bonds. Germany has recovered some of its lustre, along with most others.
“Winner” of the week, if you need one, would be Italy (–13), still trying to ride below the screens, and indeed not a 1200 to Bunds (thanks to Monti). Spain remains a laggard (+10), still hovering too close to 7% to be comfortable. Periphery understanding is that they have time (…) and don’t want any conditionality – although this is a pre-condition, so to speak. After last week’s recovery of shorted-dated IT and SP bonds, only Spanish ones actually kept their stance somewhat with 2-10s at 276 (from 289), while the Italian short end gave back over 40 bps with 2-10s flattening to 252 (from 294).
Credit was somehow bouncy in illiquid markets, either overshooting equities or underperforming, but eventually ended the week about unchanged. European equities kept some levitation potential, despite today’s correction, and closed up over 2%. On the commodities front, Oil and soft commodities still stick out and the broader CRB is up 2% on the week.
The EUR shed another 100 pips, which makes Draghi not looking like the best FX trader around, down 160 pips since speaking against shorting the EUR, although he might have cut losses at flat in Tuesday’s upside test.
10 YRS Yields: Germany 1,38% (-4); Finland 1,62% (-3); Luxembourg 1,65% (-6); Netherlands 1,66% (-4); Swaps 1,81% (-7); EU 1,92% (-16); Austria 2,02% (-2); France 2,07% (-4); EIB 2,11% (-16); EFSF 2,21% (-17); Belgium 2,50% (-1); Italy 5,89% (-13); Spain 6,87% (+10).
10 YRS Spreads: Finland 24bp (+1); Luxembourg 27bp (-2); Netherlands 28bp (unch); Swaps 43bp (-3); EU 54bp (-12); Austria 64bp (+2); France 69bp (unch); EIB 73bp (-12); EFSF 83bp (-13); Belgium 112bp (+3); Italy 451bp (-9); Spain 549bp (+14).
EUR swap curve 2-5 YRS 45bp (-3,0); 5-10 YRS 78bp (+2,0) 10-30 YRS 45bp (+3,0).
2 YRS German BKOs closed -0,077% (-4) and 5 YRS OBLs 0,34% (-8), on the week.
Swiss 2-years down to -0.38% from -0.45% a week ago.
Main at 149 from 151 (1,3% tighter); Financials at 246 after 247 (0,4% tighter). SovX at 248 from 252. Cross at 589 from 597.
Stoxx Futures at 2424 / +2,3% from 2369 with S&P minis at 1396 / +0,6% from 1388, at European COB last week.
VIX index at 15,2 after 16,4 last week.
Oil 92,7/112,2 (WTI/Brent) from 91,0/108,8 (+1,9%/+3,2%). Gold at 1623 after 1602 (+1,3%). Copper at 339 from 336 (+1,0). CRB closes 302,0 from 295,8 (+2,1%). Need to remain wary of Brent even off $113 and a slightly better EUR, we’re still at EUR 91.2 per barrel (All-time high 94.15).
Baltic Dry has gone back into reverse and ended the week at 774 from 852 (-9.1%).
As a reminder it fell pretty much straight down from a 2173 high in Oct to the 1800-900 area by the end of 2011, then straight down from 1930 to 647 by early Feb, recovered to 1165 early May, plunged back to 872 by early June, then rebounded to 1162 early July and has been correcting since – on a daily basis.
Multi-year low at 647 just 16% away. Given the latest rhythm that’s about a week from now…
EUR 1,229 after 1,237 last Friday
Greek bonds guesstimates: Mostly static at 2023s at 24.25% and 2042s at 20.00%.
All levels Friday COB 17:30 CET
Next Week:
No European long end auctions. Bills only on Monday (Italy, for a chunky EUR 8bn 1-year paper, France, Germany) and Tuesday (Belgium and Greece, for a chunky EUR 3.125bn this time).
Not much in terms of data outside GDP numbers and ZEW on Tuesday in Europe.
Assumption Day on Wed will shot most of Europe (Austria, Belgium, France, Italy, Lux, Portugal, Spain) leaving mostly Germany and Italy to play ball.
Market movements subject to US numbers and European rumours.
Germany: Tue prel. Q2 GDP fcst +0.2% after +0.5%, ZEW Current fcst 18 after 21.1 Sentiment -18.5 after -19.6; Fri PPI fcst +1.1% YoY after +1.6%
France: Tue CPI fcst unch +2.3% YoY, prel. Q2 GDP fcst -0.2% after flat
EZ: Tue Q2 GDP fcst -0.2% after flat, ZEW Thu CPI fcst 1.9% after 1.6%
Periphery: IT Mon Government debt // SP Tue CPI
US: Mon nothing Tue Small Biz optimism, PPI YoY fcst +0.5% after +0.7%, Retail Sales fcst +0.3% after -0.5%, Biz inventories fcst unch +0.3%; Wed CPI YoY fcst +0.2% after flat; Empire Manu, IP fcst +0.5% after +0.4%, Capacity fcst 79.2% after 78.9%; Thu Claims, Housing Starts & Building permits, Philly Fed; Fri Michigan Conf & Leading Indicators
Click link on title or below for today’s musical support:
Well, it’s worth chasing both, I guess…
Other side of Stereophonics “Gimme Shelter”, useful, too, these days…
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