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 14 December 2012

14 Dec 2012 – “ Stuck in the Middle with You ” (Stealers Wheel, 1972)

14 Dec 2012 – “ Stuck in the Middle with You ” (Stealers Wheel, 1972)

Utterly boring Friday session, worsened by year end inactivity… PMI figures, which were actually needed on the more positive side to justify the latest levels in Risk were just so so in Europe. But, who cares? Periphery recovering further with Spain actually the best performer on the week (outside the bailed-out gang). US stuck despite better figures.
"Stuck in the Middle with You" (Bunds 1,35% unch; Spain 5,37% -1; Stoxx 2628 +0,2%; EUR 1,314 +60) 
Fiscal Cliff. What would we do if there wasn’t that Fiscal Cliff? Well, in any case, it was the subject of the day yesterday and sent US equities gradually, and without too much panic, to a -0.5/0.75% close (with Apple down 1.75%, after initially dropping hard, towards last month’s 506 low – which it did miss, having not yet upgraded back to Google Maps…).
The 30 YRS auction came rather on the cheaper side at a 2.917% high, 3bp over target, and up 10bp from last month, with an unexciting 2.5 bid-to-cover; direct bidders, though, represented 20.3%, which is the highest of 2012 with exception of June (24%).
Asia closing mixed with most markets flattish, Korea down 1%, but China shooting up over 4% with the HSBC PMI printing slightly over expectations at 50.9 (fcst 50.8 after the 50.5 November print ending over a year of contraction). Shanghai closed over 10% over its 1952 low just 10 days ago. Cool recovery. Then again 4% for a tick over consensus might be a little over the top...

New car sales in the EU down 10.3% in Nov (When will be the next bail-out of a car maker?).
 PMI onslaught: Lukewarm for France with Services at 46 after 45.8, as expected, but Manufacturing missing 44.9 estimates to rise timidly a tick to 44.6 from 44.5. German picture oddly similar, but more worrying with a hard miss and drop in Manufacturing at 46.3 (fcst 47.3 after 46.8), but with Services doing remarkably better, with a 50-plus read of 52.1 (fcst 50 after 49.7). EZ flash estimate hence coming up with an improved Composite at 47.3 (fcst 46.9 after 46.5), but with Manufacturing just up 1 tick to 46.3 after 46.2 (fcst 46.6) and Services above consensus at 47.8 after 46.7 (fcst 47.0). 
Spanish housing still sinking with 3Q prices down 3.8% (from prior -3.3%), 15.2% YoY (from 14.4%). Good that the SAREB is running these stocks now… 

Italian government debt for Oct now showing a historic EUR 2.014bn (EUR 2 trillion plus) figure (from EUR 1.995bn). 
Finally EZ CPI as expected at -0.2% from +0.2% MoM, 2.2% unchanged YoY, although Core CPI is a tick better at 1.4% (fcst 1.5% unchanged).

Light Risk On start with equities up a good quarter across the indices. Credit flat to a tick tighter. EGBs flattish with the Hard Core 1bp softer and the Periphery 2-3 tighter to start the day with unchanged curves. Bunds 1.36%. UST still on the soft side at 1.73%. Commodities flat with Gold just under 1700. Copper up 0.8%, probably on China boost hopes. EUR above the 1.31 handle with 1.315, as chart point in sight, should ROn be confirmed.

New Issues yielded a single deal by Telecom Italia with EUR 1bn at MS +295 (about 15 over Italy) for a Jan 2020 benchmark, closing a week that only yielded slightly over EUR 4bn in 7 deals, of which 3 EUR 1bn benchmarks (Carrefour, AT&T), although one would note that the remaining deals were more on the venturous side with non-IG Nexans, BoI’s Tier 2 deal or unrated forest-manager Tornator.

Drifting sideways and totally uninspired into lunchtime…
Not much out there. Equities slightly better bid at +0.3%. Credit unchanged. Periphery recovering further and, for choice, supporting the Soft Core.
Commodities about unchanged. EUR snaking around the 31-handle, at just below ahead of the US figures. 
Bunds 1,36% (+1), OBLs at 0,33% (+2), BKOs -0,043% (+1,8). UST at 1,73% (+1).
Spanish 2s 2,82% (-5), 10s 5,36% (-2). 2-10 YRS spread 253bp (+1). 
Italian 2s 1,88% (-4), 10s 4,58% (-5). 2-10 YRS spread 270bp (-2).
Greek bonds finally not moving anymore at unchanged to close.

Some US figures to kick-off the afternoon with CPI a tick under expectations down 0.3% (fcst -0.2% from +0.1%) MoM, same for ex, 1.8% YoY (fcst 1.9% after 2.2%) and ex 1.9% (fcst 2% unchanged). Rest of data all good, but overshadowed by FC, as PMI came out at 54.2 (fcst was slight decrease to 51.8 from 52.4), while Industrial Production in Nov rose 1.1% (fcst 0.3% after -0.4% rev. -0.7%). Capacity Utilization stood at 78.4% (fcst 78% after 77.7%).

US cash open nevertheless close to flat – in expectation of something to happen. Apple doing a Newton towards its 506 level at open (and missing it)(You know, that map thing...)
USTs coming back in and tightening by 2bp to 1.70%.


Stuck. Seriously.

EUR trying to take on the 1.315 level with US equities sliding. Incidentally, US equities are trading pretty much where they stood exactly one week ago at Friday’s European close.

Pfff… And a happy weekend! Not much to add.
Bunds closed at 1,35% (unch), OBLs at 0,33% (+1) and BKOs -0,043% (+1,8). UST at 1,70% (-2) COB. 
Spanish 2s at 2,83% (-4), 10s at 5,37% (-1). 2-10 YRS spread 254bp (+2).
Italian 2s at 1,87% (-5), 10s at 4,60% (-3). 2-10 YRS spread 273bp (+1). 
Greek 2023s unchanged at 45.0 (12.83%) and 2042s at 34.0 (10.90%). Seeing Portuguese 10s closing right a 7%.
EUR inspired, but not Commodities with Gold stuck below 1700.

Take-away: Utterly boring Friday session, worsened by year end inactivity… PMI figures, which were actually needed on the more positive side to justify the latest levels in Risk were just so so in Europe. But, who cares? Periphery recovering further with Spain actually the best performer on the week (outside the bailed-out gang). US stuck despite better figures.

Outlook: Same. Sideways upwards, subject to Fiscal Cliff discussions. Looks pretty stuck. Not much data until Wednesday’s IFO and US Construction numbers.

 European 50 & 100d averages: EStoxx 2527/2497, DAX 7306/7201, CAC 3480/3462, MIB 15591/15372, IBEX 7824/7663. 

US 50, 100 & 200d averages: INDU 13126/13169/13003, S&P 1416/1415/1387, NASDAQ 2997/3027/2989 with AAPL at 589/620/602. 
EUR: 50d 1.293, 100d 1.278 & 200d 1.278. Fibo retracement (of May 2011 1.494 to Jul 2012 1.204 down-leg) at 1.273 & 1.315, then 1.349 (50%).

Don’t miss the Shuffle Rewind over the weekend.

Closing levels:

10 YRS Yields: Germany 1,35% (unch); Luxembourg 1,42% (unch); Netherlands 1,55% (unch); Finland 1,57% (unch); EU 1,61% (unch); Swaps 1,62% (+1), Austria 1,73% (-1); EIB 1,77% (-1); EFSF 1,87% (-2); France 1,98% (unch); Belgium 2,11% (-1); Italy 4,60% (-3); Spain 5,37% (-1).

10 YRS Spreads: Luxembourg 7bp (unch ); Netherlands 20bp (unch); Finland 22bp (unch); EU 26bp (unch); Swaps 27bp (+1); Austria 38bp (-1); EIB 42bp (-1); EFSF 52bp (-2); France 63bp (unch); Belgium 76bp (-1); Italy 325bp (-3); Spain 402bp (-1).

EUR swap curve 2-5 YRS 45bp (unch); 5-10 YRS 82bp (unch) 10-30 YRS 66bp (unch). 
2 YRS German BKOs closed -0,043% (+1,8) and 5 YRS OBLs 0,33% (+1).

Main +1 to 116 (0,9% wider); Financials +1 to 152 (0,7% wider); Cross -1 to 463 (-0,2% tighter). 
Stoxx Futures at 2628 / +0,2% (from 2622) with S&P minis at 1411 (-0,6% from 1419, at European close).
 VIX index at 16,7 after 16,1 yesterday same time.

Oil 86,6/109,1 (WTI/Brent) from 86,7/108,9 (-0,2%/+0,2%). Gold at 1696 after 1697 (-0,1%). Copper at 366 from 365 (+0,3%). CRB at EU COB 293,0 from 295,0 (-0,7%). 
Baltic Dry down 1.9% again, deep-diving to 784 from 799, down nearly 19% on the week and over 27% during the last fortnight.
The latest dip from the post-Summer high of 1109 in Oct had been halted at 916, before that we slipped from 1162 in July to 661 mid-September.
Upcoming Chinese New Year (10 Feb 2013)…

EUR 1,314 from 1,308

Greek 2023s unchanged at 45.0 (12.83%) and 2042s at 34.0 (10.90%).

All levels COB 17:30 CET 

Fast-forward Macro and Events:
Preciously few things…
Dragging into Year End, unless next Friday proves the Mayan right.
US housing back into focus next week. Big Friday US data dump.
Pretty empty government supply slate with Spanish and Greek bills on Tuesday

EC: Mon 17 Trade Balance; Wed 19 Construction; Thu 20 Cons Confidence 
GE: Wed 19 IFO fcst 102.3 after 101.4; Thu 20 PPI; Fr 21 Cons Confidence 
FR: Fri 21 BIZ Confidence 
Italy: Wed 19 Industrial Orders and Sales; Thu 20 Retail Sales; Fri 21 Consumer Conf
Spain: Thu 20 Housing Permits, Fri 21 PPI 
US: Mon 17 Empire Manu fcst 0 after -5.22; Tue 18 NAHB Housing; Wed 19 Housing Starts fcst 873k after 894k, Permits fcst 870k after 868k; Thu 20 Existing Homes Sales fcst 4.85m after 4.79m;Claims and yet another Q3 GDP revision; Big Friday with Chicago FED, Pers Income & Spending, Durable Goods;, Michigan Conf.

Click link under title or below for today’s musical support: 

Clowns to the left of me
Jokers to the right
Here I am
Stuck in the middle with you.

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