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 12 October 2012

12 Oct 2012 – “ Sleepy Time Time ” (Cream, 1966)

12 Oct 2012 – “ Sleepy Time Time ” (Cream, 1966)

Ah. Rinse, repeat. US equity pretty much a Ctrl- C / Ctrl-V of the prior day, chart-wise. Only difference was that Wednesday started on the prior day’s close and yesterday started with an upswing after the US data, just to fade away gradually over the session and to close about flat. Once more a nice US bond session with dealers stepping back from the to-be-auctioned 30 YRS (widening from 2.88% to 2.92%, auctioned at 2.904%, in slightly lower B/C, to close at 2.85%) in order to get back on board after the sales. Apple bellwether still see-sawing, but with a negative bias. Asian session by and large flat, taking a lead from the US and ignoring yesterday’s 1%-plus move in Europe before entering the weekend. No overnight shocker today.

European open once more rather tame, in the lately acquired relaxed manner. Futures had already trailed lower by 0.5% in after session yesterday and the open was rather un-stressed, if not upbeat.
Equities in line with closing levels, Credit even a tick tighter. EGBs firmer by 1-2bp, including Spain tighter by 4 in 10s. Unchanged swap curves. Commodities in line with the European closing levels. EUR actually slightly firmer.
Cruising mode.

Light data supply. Italian CPI confirmed at 3.4%. EZ Industrial Production for Aug beating estimates with +0.6% MoM sa (fcst -0.4% after +0.6%), however YoY data for Jul revised lower (Aug -2.9% vs. -4.1% fcst after -2.3% revised to -2.8%). Balanced out data, which would tend to show some bottoming out during the summer, although PMI would tend to show that the year-end will be tougher.

No auction supply. No real New Issues supply, either, bare a EUR 250m 10 YRS FRN increase by the EIB at 3mE +37.

No real ticker entertainment. Yesterday’s Merkel announcement about possible tax cuts in Germany, given deficit within the 3% range, shouldn’t be over-estimated. Looks more like a hint to everyone else to do the same. Front-load austerity (for some 10 years or so) and then reap the benefits. Lagarde seemingly at odds with the IMF and certainly with the Germanic approach to things. Coca-Cola’s Greek bottling operations (CC Hellenic) announcement to move HQ to Switzerland obviously a sign not everyone thinks that the Greek crisis is over yet.
That the European Union gets the Peace Nobel price is sadly an indication that no one else stood out over the last 12 months… Then again, when seeing the tensions that have built up of late, and the utter lack of reactions to some of these crises, it’s probably better to celebrate the lack of massive civilian blood-letting in Europe over the last 67 years… Skip the part about financial blood letting, though.

Spain going strong again by mid-morning in the accustomed Viernes squeeze with the short end down over 10bp, with 3% in sight, and 10 YRS 8bp, through the 5.75%-level. Might become a day-trading strategy: If rather certain of no Zapato drop, buy some Spain on Friday and surf the “bail-out might actually be for this weekend” hope-rumour. As once traded, 10s move 25, then 50cts wise (3.5bp, then 7bp), things move fast. The only thing is to be able to get out quick enough, once the recurrent “We are thinking / sinking” pops up again.
In case of doubt, ECB’s Coeuré explained the ECB could start buying, as soon as an MOU was signed (and without the ESM), but that IFM monitoring was a must. And, as we’re on it: No, the ECB won’t bridge Greece. Any solution would be nice, but without the ECB.

Hmm… Quiet day. Equities recovered from their initial shock about the lack of US follow-through. EGBs trading sideways, keeping this morning’s 1-2 basis points. Not much to mention. Spain doing fine. Yesterday’s Italian auction issues, which seemed a little stuck on their sales levels and closed about flat to the auction seem to have been absorbed by now and in line with the curve.
Bunds 1,49% (-2), OBLs 0,52% (-2), BKOs 0,047% (-0,3). UST 1,69% (-2).
Spanish 2s 3,07% (-12), 10s 5,66% (-9). Spanish 2-10s 260bp (+4).
Italian 2s 2,14% (-10), 10s 4,97% (-4). Italian 2-10s 282bp (+4)
Commodities a touch weaker, but nothing major. Copper down 1%. Gold stable. EUR stuck at 1.297.

US figures with PPI on the rise +1.1% MoM (fcst +0.8% after 1.7%) / 2.1% YoY, but with PPI Ex flat MoM (fcst +0.2% after +0.2%) falling to 2.3% YoY (fcst +2.5% unchanged). PPI increase due to 4.7% increase in energy prices , with gasoline surging +9.8%. Things under control. Ex energy. No real impact.

Initially rather lacklustre US cash open of +0.25%, later enhanced by the University of Michigan Confidence numbers way over expectations at 83.1 (fcst 78 after 78.3). 5-year high. NFP spirit spreading? 
Helped dragging European equities back into unchanged territory.
Bonds all remaining very firmer across the board with Bunds back in line with strong USTs, despite the ROn spirit in the Periphery with Spain tighter by 15bp and Italy well through the 5%-mark at 4.94%. EUR trying a spike to the 1.30s, but petering out.
US stocks then steadily drifting lower, pushing Europe back in the red.

US equities seem utterly tired. Somehow the last months’ rally ahead of QE has tired everyone and since delivery every step seems sooooo heavy. Somehow like the iPhone 5 post-delivery depression. Good that there’s an iPad mini to keep up the spirit (23 Oct). Sleepy time time…

Listless and again rather depressed equity close (down over 2% on the week). Credit resilient, supported by a stronger end of week Periphery action. Steady EGB performance across the board, here despite the Periphery strength
Bunds closed at 1,45% (-6), OBLs at 0,50% (-4) and BKOs 0,039% (-1) with UST at 1,64% (-7)
Spanish 2s at 3,04% (-15), 10s at 5,60% (-15). Spanish 2-10s 256bp (unch).
Italian 2s at 2,13% (-11), 10s at 4,97% (-4). Italian 2-10s 284bp (+6).
Commodities a bit softer. EUR pretty much back to where it started.

Take-away of today: Stronger Periphery trapping European equities, with the latter dragged down by US apathy. Risk adverseness factors (equities – Periphery - EUR) decoupling.

I realized that a separate weekly review is probably more digest than putting it at the end of the Friday review.
Look forward to the Shuffle Rewind (like last week) over the weekend, which will recap this week.

Closing levels:
10 YRS Yields: Germany 1,45% (-6); Luxembourg 1,57% (-2); Netherlands 1,70% (-3); Swaps 1,74% (-3); Finland 1,71% (-5); EU 1,87% (-4), Austria 1,95% (-3); EIB 2,11% (-6); France 2,15% (-4); EFSF 2,26% (-5); Belgium 2,37% (-3); Italy 4,97% (-4); Spain 5,60% (-15).

10 YRS Spreads: Luxembourg 12bp (+4); Netherlands 25bp (+3); Swaps 29bp (+3); Finland 26bp (+1); EU 42bp (+2); Austria 50bp (+3); EIB 66bp (unch); France 70bp (+2); EFSF 81bp (+1); Belgium 92bp (+3); Italy 352bp (+2); Spain 415bp (-9).

EUR swap curve 2-5 YRS 46bp (-1,0); 5-10 YRS 82bp (-1,0) 10-30 YRS 60bp (unch).
2 YRS German BKOs closed 0,039% (-1) and 5 YRS OBLs 0,50% (-4).

Main at 127 from 129 (1,6% tighter); Financials at 178 after 180 (1,1% tighter). SovX at 135 (-3). Cross at 540 (-4).
Stoxx Futures at 2465 / -0,7% (from 2482) with S&P minis at 1426 (-0,6% from 1435, at European close).
VIX index at 15,6 after 15,5 yesterday same time.

Oil 91,9/114,3 (WTI/Brent) from 92,5/115,6 (-0,6%/-1,1%). Gold at 1762 after 1770 (-0,5%). Copper at 371 from 376 (-1,3%). CRB at EU COB 309,0 from 307,0 (+0,7%).
BDY up another 2.5% to 926 from 903. Good drive. Weekly gain of 51 ticks (5.8%)

EUR 1,294 from 1,293

Greek bonds guesstimates: Having traded mostly stable throughout the week, Greek bonds close on some good Friday performance with 2023s at 17.75% (-25) and 2042s even at 15.5% (-100). SOMEHOW. GREECE. WILL.BE.SAVED. Somehow…

All levels COB 17:30 CET

Next Week Macro Data:
Looking forward to next week doesn’t make for an exciting reading. European data mostly minor. German ZEW sentiment indicator. Chinese massive data dump on Thursday 18 Oct. US IP and housing in the widest sense.
Auction supply with attention on Spanish 18m bills next Wed and especially the 3, 4 and 10 YRS BONO auction on Thursday.
Trading will remain rather technical, subject to Periphery rumours and jitters.

EZ: Tue EZ CPI Final +2.7%; Wed Construction Output
GE: Tue ZEW (last Current 12.6, Sentiment -18.2); Fri PPI  (last +0.5% MoM)
FR: Pffff… Rien
Italy: Fri 19 Indu Orders (last -4.9 YoY), Sales (last -5.3% YoY)
Spain: Thu Q3 House Prices (last -2.5%, QoQ, -8.3% YoY)
US: Mon 15 Empire Manu, Retail Sales, Biz Inventories, Tue CPI, IP, Wed Housing Starts & Building Permits Thu Claims, Philly FED, Leading Ind, Fri Home Sales
China : Sat 13 Trade (fcst Exports +5.6% after 2.7%, Imports +2.4% after -2.6% YoY); Mon CPI fcst +1.9% after +2%; Thu Q3 GDP fcst +7.4% after +7.6% YoY, +2% after +1.8% QoQ, IP fcst +9% after +8.9% YoY, Retail Sales +13.2% unch YoY.

Click link under title or below for today’s musical support:
Sleepy and tired... Have a nice weekend...

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