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

Tuesday 18 December 2012

18 Dec 2012 – “ I Saw Mommy Kissing Santa Claus ” (John Mellencamp, 1987)

18 Dec 2012 – “ I Saw Mommy Kissing Santa Claus ” (John Mellencamp, 1987)

Utterly boring Friday Monday Tuesday session, worsened by year end inactivity… Good close. Fiscal Cliff haggling on-going with a positive spin this time and Risk riding high.Spain catching up and paring yesterday’s soft patch, as is Italy. ESToxx at the highest since Aug 2011. Credit very squeezed. EUR strong. Merry Mood!
"I Saw Mommy Kissing Santa Claus " (Bunds 1,42% +5; Spain 5,29% -12; Stoxx 2647 +0,7%; EUR 1,322 +50)
Monday close in the US eventually back in the green with the S&P up a healthy 1%, as Fiscal Cliff views convergence was on the plate, the sole discerning market factor to end the year. Still needs to be bridged, for good, though. Even Apple made a U-turn, closing up 1.8%, having traded a new recent low at $501, before rebounding over 3.5%.
Asia a mixed bag with Japan still pushing on after the election outcome, most other markets up 0.5%, following the US, but with China taking a breather, closing by and large flat, although down over 1% from the session high, as the new government in charge might keep on curbing property and try to balance out a (by standard of the last decade) modest growth target of 7.5%.

Once more nothing on the fundamental macro front for the day with US figures restricted to the NAHB Housing Index.

Another round of light Risk On to start the session, akin to the last couple of days. Equities up 0.5%, Bunds wider by 1, Periphery tighter by 3… Credit 1-3 ticks tighter. Déjà vu… UST the weakest link out there with 10 YRS at 1.77 (+4).
Bunds 1,38% (+1), OBLs 0,36% (unch) and BKOs -0,010% (unch). UST at 1,77% (+4) .
Spanish 10s at 5,38% (-3) / B+400 and 10s at 4,53% (-3).
EUR around where left last night at 1.316 and Commodities about a quarter firmer.

And there you go: Stuck again in directionless and listless pre-holidays / year-end market.

Spanish bad loans still rising relentlessly with October numbers a new record at 11.2%, nearly EUR 190bn, after 10.7% in September and company bad loans for Q3 hitting 16.6%. Not that this would dent the market mood with everyone happy about the Spanish bills sales doing good on the EUR 3.5bn target, with 3m and 6m bills sold at 1.195% and 1.609% (last 1.25% and 1.67%), so once more everything doing better.
Greece sold EUR 1.3bn (including non-comps) 3m bills at 4.11% (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 market dormant.

Midday levels flashing equities still up a small 0.5%, despite a weak patch in the CAC, but with Credit pushing ever tighter with the Main at 112 (2 / -1.8%) and Financials at 144 (-3 / -2%).
Main through this year’s low at 112 in March and back to July 2011 levels (which was a through following the spiking out started in summer 2011). Difficult to see where to go from here, but next barrier is the 95-110 area. Financials have taken out the mid-Oct 2012 lows yesterday and have slipped to May 2011 levels. Similar to the main, we had an intermediate through around 120 in April 2011 with the low 140s acting as top several times before. 120-140 area the one to fight for now.
EGBs by and large static with the Periphery pushing tighter.
Bunds 1,38% (+1), OBLs 0,36% (unch) and BKOs -0,010% (unch). UST 1,77% (+4).
Spanish 2s 2,82% (-4), 10s 5,34% (-7). 2-10 YRS spread 252bp (-3).
Italian 2s 1,79% (-5), 10s 4,48% (-8). 2-10 YRS spread 269bp (-3).
EUR on 1.318 with Commodities flattish.
Greek bonds up 25 with 2023s at 45.25 (12.77% - bp) and 2042s at 34.50 (10.78% -12bp).

In a word: Boring, although the Credit and EUR performances look good.
On the Periphery, keep in mind that this is the last day for standard settlement on Friday and only few will probably enjoy a game of “chase your bonds / failed deliveries in-between years”, knowing that most of Europe will be shut next week but for Thursday 27 Dec and a little as possible Friday.

French government ministers are obviously still competing and head to head for the biggest economic absurdities, be it on fiscal-exiled actors, Indian steel magnates or “temporary nationalization” as “a tool for France”, a solution gaining popularity. You bet.

No US figures to kick-off the afternoon. US futures still about 1% better than Europe since Friday with UST softer by 8 versus 4 for Bunds. Spread at 39 at the widest since the 46 peak early April.

US equity cash open very close to home, in line with Europe, but for a stronger NASDAQ and Apple past $525 again, followed by a NAHB Housing Index on consensus of 47 (after 46 in Nov), the highest since the 13 though in June last year and in Aug & Sep 2010.

Closing, in absence of trouble, in some good Risk On and Merry Mood.
Equities up a good 0.75%, trailing the US, closing pretty much a on the new high of 2647 and back to Aug 2011 levels. Elves exist! Ho ho ho!
Very strong Credit close (see above). Financials squeezed through the roof (-5%) and Crossover through 450.
Very strong Periphery close (see above). Spain back well through the 400 to Bunds and Italy nearing 300 to Bunds. Wouldn’t be surprised to see the 5% tested in year-end squeeze, if no shoe drops before, but need to tackle the 5.15%-5.25% for good before.
Bunds and the Hard Core pummelled, as the USTs (+8).
Bunds closed at 1,42% (+5), OBLs at 0,39% (+3) and BKOs -0,003% (+0,8). UST at 1,81% (+8) COB.
Spanish 2s at 2,83% (-3), 10s at 5,29% (-12). 2-10 YRS spread 247bp (-8).
Italian 2s at 1,72% (-12), 10s at 4,45% (-11). 2-10 YRS spread 273bp (+1).
EUR still on an up-wave. Ride On! Commodities lacklustre in comparison with Gold down over 0.5%, pushing away from the 1700-mark.

Take-away: Utterly boring Friday Monday Tuesday session, worsened by year end inactivity… Good close. Fiscal Cliff haggling on-going with a positive spin this time and Risk riding high.Spain catching up and paring yesterday’s soft patch, as is Italy. ESToxx at the highest since Aug 2011. Credit very squeezed. EUR strong. Merry Mood!

Outlook: Same. Sideways upwards, subject to Fiscal Cliff discussions.  German IFO Business Climate data tomorrow (fcst 102 after 101.4) and US Construction numbers with Housing Starts fcst 871k after 894k and Building Permits 87k after rev. 868k.
Just the saaaaaaaaaaaame – until Santa comes.
USD 35bn 5 YRS tonight and USD 29bn 7 YRS on Thursday on the supply side.
Europe done for the week.

European 50 & 100d averages: EStoxx 2532/2503, DAX 7316/7219, CAC 3489/3469, MIB 15601/15423, IBEX 7829/7689.
US 50, 100 & 200d averages: INDU 13114/13180/13005, S&P 1415/1416/1388, NASDAQ 2992/3029/2989 with AAPL at 583/618/601.
EUR: 50d 1.294, 100d 1.280 & 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 1,42% (+5); Luxembourg 1,45% (+3); Netherlands 1,63% (+5); Finland 1,64% (+4); EU 1,63% (+2); Swaps 1,64% (+2), Austria 1,81% (+5); EIB 1,80% (+3); EFSF 1,89% (+1); France 2,04% (+3); Belgium 2,17% (+3); Italy 4,45% (-11); Spain 5,29% (-12).

10 YRS Spreads: Luxembourg 3bp (-2); Netherlands 21bp (unch); Finland 22bp (-1); EU 21bp (-3); Swaps 22bp (-3); Austria 39bp (unch); EIB 38bp (-2); EFSF 47bp (-4); France 62bp (-2); Belgium 75bp (-2); Italy 303bp (-16); Spain 387bp (-17).

EUR swap curve 2-5 YRS 45bp (+1,0); 5-10 YRS 82bp (+1,0) 10-30 YRS 67bp (unch).
2 YRS German BKOs closed -0,003% (+0,8) and 5 YRS OBLs 0,39% (+3).

Main -3 to 111 (-2,6% tighter); Financials -8 to 139 (-5,4% tighter); Cross -17 to 445 (-3,7% tighter).
Stoxx Futures at 2647 / +0,7% (from 2628) with S&P minis at 1437 (+1,3% from 1419, at European close).
VIX index at 15,5 after 16,9 yesterday same time.

Oil 88,0/108,8 (WTI/Brent) from 87,5/108,1 (+0,6%/+0,6%). Gold at 1685 after 1696 (-0,6%). Copper at 365 from 365 (+0,0%). CRB at EU COB 296,0 from 295,0 (+0,3%).
Wack the Balt! Baltic Dry purge on-going and confirming a fourth week of consolidation, down 3% to 743.
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. 21st century low was 647 in Feb 2012. Upcoming Chinese New Year (10 Feb 2013)… Seems a little far, no?

EUR 1,322 from 1,317

Greek bonds up 25 with 2023s at 45.25 (12.77% - bp) and 2042s at 34.50 (10.78% -12bp).

All levels COB 17:30 CET

Fast-forward Macro and Events:
Preciously few things…
Dragging into Year End, unless Friday proves the Mayan right.
US housing back into focus this week. Big Friday US data dump.

EC: Wed Construction; Thu Cons Confidence
GE: Wed IFO Biz Climate fcst 102 after 101.4, Current 108 after 108.1 and Expectations at 96.4 after 95.2; Thu PPI fcst -0.2% after flat MoM; Fr Consumer Conf fcst 5.9 unch
FR: Fri BIZ Confidence fcst 89 after 88
Italy: Wed Industrial Orders fcst +1% after -4% MoM sa and Sales; Thu Retail Sales fcst flat after +0.1% MoM sa; Fri Consumer Conf fcst 85.1 after 84.8
Spain: Thu Housing Permits prior -51.3% YoY, Fri PPI -0.2% after -0.1% MoM
US: Wed Housing Starts fcst 873k after 894k, Permits fcst 870k after 868k; Thu 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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