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

Monday 17 December 2012

17 Dec 2012 – “Jingle Bell Rock ” (Billy Idol, 2006)

17 Dec 2012 – “Jingle Bell Rock ” (Billy Idol, 2006)

Utterly boring Friday Monday session, worsened by year-end inactivity… Won’t get any better going forward, probably. Fiscal Cliff a cliff-hanger (I know, cheap)… Spain on the heavier side with contingent funding holes still popping up here and there.
"Jingle Bell Rock" (Bunds 1,37% +2; Spain 5,41% +4; Stoxx 2628 unch; EUR 1,317 +30)
Friday saw again a slightly negative close in the US, as Fiscal Cliff issues remained on the calendar and Apple re-tested recent lows to close pretty much on them.
Needless to say how saddening that Newtown disaster is, given the kids’ age and the pre-holiday timing. Still, all our thoughts are with them. And the US should grow up to reality and realize that the constitutional right to fire a musket, which takes 5 minutes to reload, is not applicable nowadays anymore. Wake up!
Japanese landslide elections giving the LDP-led coalition a two-third majority should at least enable the government to be taken by its promises of 3% growth and 2% inflation; although a simple crawl out of recession in the coming months might just be more realistic at this stage.
Monday Asian session mostly red, though, with the exception of Japan up a short 1% and China half a percent. US futures up a quarter on Boehner hints of higher taxes (,but again against spending cuts). At least, talks drag on.

No major European data releases for the day (nor US ones, really) and nothing to start with at all. Merkel in the FT on how to go forward for Europe. The subject of German demographics, which is certainly one of the drivers of the actual German stance, as its future productivity will certainly be impacted by this fundamental issue, is a key one to understand German worries about social costs.

So shoot for light Risk On start into the week with Bunds 1 and UST 2 softer at 1.36% and 1.72%, likewise for OBLs. Other EGBs as well 1bp softer with the Periphery 3 tighter for Italy at 4.57% and 1 tighter for Spain at 5.36%, but symbolically back to 400 to Bunds.
Equities up a couple of ticks, just so slightly in positive territory.
Commodities mixed (WTI slightly up, Brent down, Gold slipping to 1689, Copper slightly up) with the EUR now past the 1.315 mark at 1.316, having trade out to 1.319 in Asia.
Sit back, relax.

EZ Oct trade surplus down to EUR 7.9bn sa (EUR 10.2bn sa) from rev. EUR 11bn sa with exports down 1.4% for a second month (after -1.3% in Sep) and imports up 0.6%.

French weekly bill sales with EUR 3.4bn 3m at -0.015%, 1.2bn 6m at -0.006% and EUR 1.7bn 12m at +0.005% (after -0.026%, -0.015% and -0.012%). Will have EUR 3.5bn Spanish 3 and 6m tomorrow (last 1.25% and 1.67%) next to EUR 1bn Greek 3m (last 4.20%) and that’s it for the week.
Unless postponed or cancelled, we’ll just have another round next week with Italian bills on Wednesday and bonds on Thursday. That would close 2012.

New Issues yet again on hold and probably so until January.

Equities drifting lower by late morning with Apple getting pushed below $500 in European trading seen as one reason.
Midday levels flashing equities down 0.2%, although Credit tighter by 1% and especially Financials tighter by 2%.
Bunds closed at 1,37% (+2), OBLs at 0,35% (+2) and BKOs -0,030% (+1,3). UST at 1,72% (+2) COB.
EGBs pretty static at morning levels, although now split in the Periphery with Italy 4 tighter in 10s and Spain as much wider. Southern 2 YRS close to closing levels, though.
Spanish 2s 2,84% (+1), 10s 5,41% (+4). 2-10 YRS spread 257bp (+3).
Italian 2s 1,85% (-2), 10s 4,56% (-4). 2-10 YRS spread 271bp (-2).
EUR on 1.315 with Commodities a little softer than in the morning, but close to home, too.
Greek bonds unchanged with 2023s at 45.0 (12.84%) and 2042s at 34.0 (10.90%).

In a word: Yawn!

Sole US figure to kick off the afternoon with Empire Manufacturing a HUGE miss at -8.1 (fcst -1 after -5.22), in total contradiction to last week’s PMI rebound to 54.2 (fcst 51.8 after 52.4). New Orders and shipments dropping.
Eventually Apple did not tank at US cash open and everyone was happy again with US indices opening up a healthy +0.4%, but with no follow-up on the European side outside moving to unchanged.
Had Apple hit the bottom of the cart at 501 at the time of writing, before rebounding a little…

Draghi before the EU Parliament, but with nothing crisp. Pushing for fiscal union. SMP profits go to the NCBs, which then are free to do whatever they like with those… (…including sending them back to Greece…).

And that’s it, folks… Will probably not get more exciting in the coming days.
Equities closing unchanged to the tick, US ones firmer. Credit firmer (1.7% for the Main, over 3% in Financials). EGBs wobbly, swaps stable and agency paper (swap-driven) about unchanged, too.
Spain on the heavier side, but with no more obvious reason than having been the best performing (non-bailed-out) EGBs last week, while it keeps uncovering contingent funding holes (toll-roads, now, next to the electricity tariff deficits)…
Bunds closed at 1,37% (+2), OBLs at 0,36% (+3) and BKOs -0,010% (+3,3). UST at 1,73% (+3) COB.
Spanish 2s at 2,86% (+3), 10s at 5,41% (+4). 2-10 YRS spread 255bp (+1).
Italian 2s at 1,84% (-3), 10s at 4,56% (-4). 2-10 YRS spread 272bp (-1).
Greek 2023s unchanged at 45.0 (12.84%) and 2042s +25 at 34.25 (10.84% -6bp).
Portuguese 10s unchanged, right at 7%.
EUR still riding high(er). Commodities mixed. Oil split (+/-1%). Gold static.

Take-away: Utterly boring Friday Monday session, worsened by year end inactivity… Won’t get any better going forward, probably. Fiscal Cliff a cliff-hanger (I know, cheap)… Spain on the heavier side with contingent funding holes still popping up here and there.

Outlook: Same. Sideways upwards, subject to Fiscal Cliff discussions. Looks pretty stuck. Not much data until Wednesday’s IFO and US Construction numbers… Just the saaaaaaaaaaaame – until Santa comes.
USD 35bn 2 YRS UST tonight, USD 35bn 5 YRS tomorrow and USD 29bn 7 YRS on Thursday on the supply side. Europe done by tomorrow’s bills sales.

European 50 & 100d averages: EStoxx 2529/2500, DAX 7310/7210, CAC 3484/3466, MIB 15592/15399, IBEX 7826/7677.
US 50, 100 & 200d averages: INDU 13119/13174/13004, S&P 1415/1415/1387, NASDAQ 2994/3028/2989 with AAPL at 586/619/601.
EUR: 50d 1.293, 100d 1.279 & 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%).

Closing levels:
10 YRS Yields: Germany 1,37% (+2); Luxembourg 1,42% (unch); Netherlands 1,58% (+3); Finland 1,60% (+3); EU 1,61% (unch); Swaps 1,62% (unch), Austria 1,76% (+3); EIB 1,77% (unch); EFSF 1,88% (+1); France 2,01% (+3); Belgium 2,14% (+3); Italy 4,56% (-4); Spain 5,41% (+4).

10 YRS Spreads: Luxembourg 5bp (-2); Netherlands 21bp (+1); Finland 23bp (+1); EU 24bp (-2); Swaps 25bp (-2); Austria 39bp (+1); EIB 40bp (-2); EFSF 51bp (-1); France 64bp (+1); Belgium 77bp (+1); Italy 319bp (-6); Spain 404bp (+2).

EUR swap curve 2-5 YRS 44bp (-1,0); 5-10 YRS 81bp (-1,0) 10-30 YRS 67bp (+1,0).
2 YRS German BKOs closed -0,010% (+3,3) and 5 YRS OBLs 0,36% (+3).

Main -2 to 114 (-1,7% tighter); Financials -5 to 147 (-3,3% tighter); Cross -1 to 462 Stoxx Futures at 2628 / unchanged to the tick (from 2628) with S&P minis at 1419 (+0,6% from 1411, at European close).
VIX index at 16,9 after 16,7 yesterday same time.

Oil 87,5/108,1 (WTI/Brent) from 86,6/109,1 (+1,0%/-0,9%). Gold at 1696 after 1696 (unchanged). Copper at 365 from 366 (-0,3%). CRB at EU COB 295,0 from 293,0 (+0,7%).
Baltic Dry purge on-going and starting a fourth week of consolidation, down 2.3% again, at 766 after 784.
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 1,317 from 1,314

Greek 2023s unchanged at 45.0 (12.84%) and 2042s +25 at 34.25 (10.84% -6bp).

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.
Empty government supply after Spanish and Greek bills tomorrow.

EC: 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: 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:
Definitively the right time to dig and unearth Xmas rock songs… As cheesy as some may be…

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