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 16 November 2012

16 Nov 2012 – “That's the Way (I Like It) ” (KC and the Sunshine Band, 1975)

16 Nov 2012 – “That's the Way (I Like It) ” (KC and the Sunshine Band, 1975)

Mostly boring. Several inconclusive downside tests in European equities. Static bonds, unwilling to tighten further. More US equity weakness, more downside. Way is shown by US equity dump. Periphery? What Periphery? What problem? Credit, EGBs, most commodities just watching. Dismal close.
"That's the Way (I Like It)" (Bunds 1,32% -2; Spain 5,86% -3; Stoxx 2429 -1,2%; EUR 1,27 -90)
As somehow to be expected, the US markets closed down, as the rally rebound during the EU afternoon session just fizzled out and with the last trading hour pushing indices back into negative territory. Again a comfortable Copy-Paste.
Aside the comfort, US equities just closed where left in Europe, although that failed rebound is certainly visible.
Asia rather on the soft side to end the week, except Japan, ripping once more 2% higher. Shanghai still hovering just above its 2.004-low (26Sep).
Nothing really exciting overnight. Lagarde reference to the Greek solutions not done “until the Fat Lady sings” a bit of a riddle. Angie? That would be mean. 

No real data to start the end of the week. European Oct car registrations still sliding (-4.8% after -10.8%), down 6.9% YTD. Last positive number was in Sep 2011.

Seriously sideways open. All unchanged to a tick or two.
Bunds stuck at 1.34%, USTs 1.59%. German curve or other EGBs unchanged.
Italy & Spain some 3bp better.
Equities unchanged, Credit unchanged.
Note EUR back to 1.275 and Brent down 2.5% overnight and back to the 108-handle. Yawn! Friday.

Equities drifting lower, having failed to break-out on the upside. No visible trigger, but good enough to re-test last Friday’s sell-off lows in EStoxx and to definitively print new lows for CAC and DAX (optically below 7000). EStoxx back on Sep 28 and Oct 10 lows.
Equities playing solo. Bunds duly ticked up a couple of ticks, and printed 1.33%, as the DAX slid to its lows- before giving back and going back to slip.

No government auctions. Monday bills only (France, Netherlands, EFSF); Tuesday will see 12 and 18m Spanish bills, 10 YRS Bund increase on Wed next to Portuguese bills; 3, 5 & 9 YRS BONOs on Thursday. Light week. All eyes on Spain.

EZ Sep trade surplus was EUR 11.3bn (fcst EUR 9.5bn after EUR 9.9bn), with exports -1.1% at EUR 158.5bn, but imports down even more -2.7% to EUR 147.2bn. Highest surplus ever since EUR introduction.

Noyer, Weidman, Draghi & Coeuré yesterday, EU SPOX all on the ticker at some time, but nothing neither new nor even remotely as intriguing as Lagarde’s Fat Lady.

Midday levels uninspiring with equities sluggishly rebounding twice off lows before being suddenly bid up into the void to unchanged levels shortly before 13 CET. Up about 0.8%-1% on no news within one hour. Algos, I here you coming… Credit flat.
Bunds 1,35% (+1), OBLs 0,36% (unch), BKOs -0,039% (+0,3). UST 1,59% (unch).
Spanish 2s 3,22% (unch), 10s at 5,87% (-2). Spanish 2-10s 265bp (-1).
Italian 2s 2,07% (unch), 10s at 4,87% (-2). Italian 2-10s 280bp (-2).
Commodities down 0.5% across the board, Brent 108.2 down 2.5%, morning levels. EUR 1.274.
Waiting for US input with no early afternoon figures on the plate. Had another 0.50%-0.75% lunch-time sell-off and rebound to pass time – and move back to Square 1.
And then some more sideways movements. Yaaaaaaaaaaawn! 

Plenty of time to read The Economist’s take on the French “time-bomb”. Can’t even understand the uproar here in France, as the articles themselves are much more nuanced than the front page, of which, it must be said, the fused baguettes on the picture just look delicious. Content is very matter-of-fact. If front page headlines were there for anything else than causing a steer and make people buy, it would be known…
In any case, no impact other than the French curve tightening in 1 bp.

 US figures a miss, but who seems to care, with Oct Industrial Production down 0.4% (fcst was +0.2% after +0.4%, rev. 0.2%). Manufacturing Output down 0.9%. 1% loss blamed on Sandy Miss plus prior revision. Capacity Utilization at 77.8% (fcst was unchanged 78.3%). No immediate impact. Subsequent flat US cash open. UST unchanged 1.59%.
On second thought, US equities sliding towards yesterday’s lows, checking if these were really the lows, which they weren’t, and dragging European Risk along.
50% INDU retracement of the Oct 2011 – Oct 2012 at 12.447. S&P at 1317. NASDAQ 2819 (tested at 16:05 and broken 17:25).
Shouldn’t miss that opportunity to revisit these levels.

Wow. Seemingly a pure equity play. Europe closing LOD. Sh** close.
EGBs didn’t move most of the day and definitively not in the afternoon. Had to witness the closing dump to move Bunds a further basis point tighter.
Bunds closed at 1,32% (-2), OBLs at 0,34% (-2) and BKOs -0,052% (-1,1) with UST at 1,56% (-3).
Spanish 2s at 3,22% (unch), 10s at 5,86% (-3). Spanish 2-10s 264bp (-2).
Italian 2s at 2,06% (-1), 10s at 4,87% (-2). Italian 2-10s 281bp (-1).
Commodity shake-out rather limited.

Take-away: Mostly boring. Several inconclusive downside tests in European equities. Static bonds, unwilling to tighten further. More US equity weakness, more downside. Way is shown by US equity dump. Periphery? What Periphery? What problem? Credit, EGBs, most commodities just watching. Dismal close.

Outlook for Monday / Next Week: More of the same? No real European data. Need to check the US close. Massive post-EU close nearly 1% spike. Fiscal Cliff. Spailout & Grexit… Gloomy.

European 50d & 100d: EStoxx 2516/2434 (50d/100d), DAX 7290/7030, CAC 3457/3390, MIB 15708/14977, IBEX 7863/7418.
US 100d& 200d for INDU 13122/12993, SPX 1404/1382 and NASDAQ 3015/2985, as Apple-challenged (200d 595).
EUR: 100d 1.265 & 200d 1.281. Fibo retracement (of May 2011 1.494 & Jul 2012 1.204 down-leg) at 1.273& 1.315. Jul 2012 to Sep rebound levels: 1.231 – 1.247 – 1.2611.274 – 1.291.

Closing a rather uninspiring New Issues week with EUR 500m 12 YRS Big Mac’s at MS+53. I’m lovin’ it. Not right on time lows in 12 YRS swaps (June 2012 still 12bp tighter), but with tighter credit spreads, this is cheap money. French real-estate Société Foncière Lyonnaise finally delivering EUR 500m 5 YRS at MS +275, having had to pull that same deal at MS +250 on Sep 11.

Don’t miss the Shuffle Rewind over the weekend.

Closing levels:
10 YRS Yields: Germany 1,32% (-2); Luxembourg 1,47% (+0); Netherlands 1,58% (-3); Finland 1,60% (-2); Swaps 1,66% (-1); EU 1,70% (-1), Austria 1,77% (unch); EIB 1,86% (-1); EFSF 1,98% (-1); France 2,07% (-1); Belgium 2,25% (unch); Italy 4,87% (-2); Spain 5,86% (-3).

10 YRS Spreads: Luxembourg 15bp (+2); Netherlands 26bp (-1); Finland 28bp (unch); Swaps 34bp (+1); EU 38bp (+1); Austria 45bp (+2); EIB 54bp (+1); EFSF 66bp (+1); France 75bp (+1); Belgium 93bp (+2); Italy 355bp (unch); Spain 454bp (-1).

EUR swap curve 2-5 YRS 46bp (unch); 5-10 YRS 81bp (-1,0) 10-30 YRS 61bp (+1,0).
2 YRS German BKOs closed -0,052% (-1,1), Dec 2012 -0.41% and 5 YRS OBLs 0,34% (-2).

Main +3 to 139 (2,2% wider); Financials +2 to 188 (1,1% wider); Cross +11 to 572 (2,0% wider).
Stoxx Futures at 2429 / -1,2% (from 2459) with S&P minis at 1344 (-0,4% from 1349, at European close).
VIX index at 18,3 after 18,0 yesterday same time.

Oil 86,9/108,2 (WTI/Brent) from 86,1/110,8 (+0,9%/-2,3%). Gold at 1711 after 1716 (-0,3%). Copper at 343 from 346 (-0,9%). CRB at EU COB 293,0 from 294,0 (-0,3%).
BDIY, up 12 to 1036 (+1.2%)
Intermediate 2012 highs after Chinese New Year and a 10-year low at 647 early Feb were 1165 early May, before dipping to 872 in June, rising back to 1162, retesting lows at 661 mid-Sep, re-testing highs at 1109 before sliding back to 916 in the last down-leg.

EUR 1,270 from 1,279

Greek guesstimate: Greek bonds back 25 tighter to 17.25% for 2023s and 14.50% for 2042s.

All levels COB 17:30 CET

Fast-forward Macro and Events:
Be warned that there isn’t much in terms of European data until next week’s Thursday, which will be PMI day. Wednesday crowded data dump ahead of Thu 22 Thanksgiving holiday. Black Friday. EU FM meeting on Monday evening and Eurogroup on Tuesday to settle Greece… or probably not.
Light week auction week: Tue 12 & 18m Spanish bills; Wed 10 YRS Bund increase and Portuguese bills; Thu 2015 2017 & 2021 BONOs. All eyes on Spain, thus.

EZ: Mon 19 Construction; Thu 22 Comp / Manu / Services PMI last 45.7, fcst 45.5 after 45.4 and 46 unch, EZ Consumer Conf fcst -25.5 after -25.7
GE: Tue PPI; Thu 22 PMI Manu last 46 Services 48.4; Fri 23 Final GDP, IFO Nov Biz Climate last 100, Current last 107.3, Expectations last 93.2
FR: Thu 22 PMI Manu last 43.7, Services last 44.6; Fri 23 Biz Conf last 85
Italy: Mon 19 Sep Indu Orders last +0.7% MoM & Sales last +2.9% MoM; Fri 23 Retail Sales last +0.% MoM
Spain: Wed 21 Trade; Fri 23 PPI
US: Mon 19 Home Sales; Tue 20 Housing Starts and Permits; Wed 21 PMI, Claims, U Michigan, Leading Indicators. Wed 22 Thanksgiving

Click link under title or below for today’s musical support:
Well, willingly or not. THAT seems to be the way…Aha. Aha.
And it did allow me to have a “Royal Flush” with songs containing “Way” in the title.

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