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 27 April 2012

27 April 2012 – "Arrested for Driving While Blind" (ZZ Top, 1976)

27 April 2012 – "Arrested for Driving While Blind" (ZZ Top, 1976)

Had forgotten that tail risk of rating agencies, although the market has become so blasé in the matter. Asia did forgo the rather positive US close with the S&P closing just shy of the 1400 mark, as S&P downgraded Spain to BBB+, neg outlook, on the long end and to A2 on its short-term debt.
Had an initial kneejerk reaction of -1% in equities and wider credit and a bit of light to quality, but eventually quality is so expensive that by the end of the morning, markets settled to a flight from the periphery with Spain and Italy in tandem 10 bp wider on the long end and all other asset classes about unchanged to slightly better.

Eco figures out of Spain published this morning are of course a dampener with Q1 unemployment rising to 24.4%, youth unemployment past the 50% mark, falling retails sales and to top it off 2% inflation, which was higher than expected.
Actually, none of today’s figures in Europe was any good (French unemployment rising, German consumer confidence below fcst, French consumer spending below fcst), but somehow none of this had a market impact.

Italy sold EUR 5.95bn, of which  EUR 2..4bn 5s at 4.86% (from 4.18% in Mar) and EUR 2.5bn EUR 10s at 5.84% (from 5.24% before) with the rest in 4 and 7 YRS, thus falling a bit short of what was intended. Bid to cover ratios slightly on the weak side, too. So, as for Spain before, higher prices and definitively less appetite.
Talking of appetite, it looks like both leading Spanish banks have acknowledged to have hit limits on their Spanish government debt holdings.

By midday, things were mainly unchanged and the stress forgotten, except for Italy and Spain. Just ahead of the US figures, European equities well over 1%, then dipping on US figures and recovering…
Month end squeeze?
US figures below forecast (very often lately) with QoQ GDP growth at 2.2% versus 2.5% fcst and 3% previously. Consumption’s good. Someone has to buy those iPhones and iPads…

New Issues pretty much on hold

Fair amount of unrejoicing news produces upbeat markets… Things looked bad this morning, better now…

10 YRS Yields: Germany 1,69% (+1); Luxembourg 2,21% (unch); Swaps 2,23% (-1); Finland 2,22% (unch); Netherlands 2,25% (-1); Austria 2,79% (-2); France 2,98% (unch); EFSF 3,05% (unch); Belgium 3,34% (-1); Italy 5,65% (+2); Spain 5,85% (+4).

10 YRS Spreads: Luxembourg 51bp (unch); Swaps 55bp (unch); Finland 53bp (unch); Netherlands 55bp (-2); Austria 110bp (-2); France 129bp (unch); EFSF 136bp (unch); Belgium 165bp (-2); Italy 395bp (+2); Spain 416bp (+4).

EUR swap curve 2-5 YRS 50,2bp (-0,5); 5-10 YRS 74,6bp (+0,4) 10-30 YRS 29,8bp (+0,4).
2 YRS German BKOs closed 0,10% (+1) and 5 YRS OBLs 0,63% (unch).

Main at 140 from 143 (-2,2%); Financials at 245 after 248 (-1,3%). SovX at 275 from 275. Cross at 654 from 665.

Stoxx Futures at 2293 / +1,9% (from 2251) with the S&P at 1400 (+0,7% from 1391, at European close).
VIX index at 16,2 after 16,8 yesterday same time.

EUR 1,326 after 1,322
ECB deposits jumping to EUR 791bn after  to EUR 782bn.
Oil 104,2/119,5 (WTI/Brent) from 103,9/119,4 (+0,3%/+0,1%). Gold at 1655 after 1654 (+0,1%). Copper at 377 from 374 (+0,8%). CRB closes 303,3 from 302,9 (+0,1%).
Baltic Dry at 1156 after 1148.
All levels European COB 15:00 CET

On the week (compared to Fri 20 Apr close):
While we had some good volatility, final reading is surprisingly stable. Sure things are a little tense out there, hence new record lows in German yields. Eventually, outperformer of the week was Austria, followed by France and Holland. Spain was Spain, eventually not really good, but not really worse. Underperformer of the week is Italy, together with the EFSF.
Equities recovering. Credit drifting sideways. Commodities slightly up.
10 YRS Yields: Germany 1,69% (-1); Luxembourg 2,21% (unch); Swaps 2,23% (-1); Finland 2,22% (-3); Netherlands 2,25% (-7); Austria 2,79% (-14); France 2,98% (-10); EFSF 3,05% (+5); Belgium 3,34% (-11); Italy 5,65% (-1); Spain 5,85% (-9).

10 YRS Spreads: Luxembourg 51bp (+2); Swaps 55bp (+1); Finland 53bp (-1); Netherlands 55bp (-5); Austria 110bp (-12); EFSF 136bp (+6); France 129bp (-8); Belgium 165bp (-10); Italy 395bp (unch); Spain 416bp (-7).

EUR swap curve 2-5 YRS 50,2bp (+2,9); 5-10 YRS 74,6bp (+4,1) 10-30 YRS 29,8bp (+3,0).
2 YRS German BKOs closed 0,10% (from 0.14%) and 5 YRS OBLs 0,63% (from 0.67%), on the week.

Portugal still faring very well with 2YRS 11.50% 5 YRS 11.50% 10 YRS 10.25% (from 13.25% 12.75% 11.50%)
Greece about unchanged at 20.75% from 21% in 2023s and17.25% unchanged for the 2042s

Main at 140 from 144 (-2,7%); Financials at 245 after 255 (-4,1%). SovX at 275 from 283. Cross at 654 from 675.

Oil 104,2/119,5 (WTI/Brent) from 104,6/119,5 (-0,4%/+0,0%) . Gold at 1655 after 1645 (+0,6%). Copper at 377 from 369 (+2,2%) . CRB closes 303,3 from 301,4 (+0,6%). Gold up on QE hope?
Stoxx Futures at 2293 / +1,8% from 2253 with the S&P at 1400 / +1,1% from 1385, at European COB last week.
VIX index at 16,2 after 17,6 last week.

EUR 1,326 after 1,321 last Friday
Baltic Dry at 1156 from last week’s close at 1067 (+8.3%).

Next week:
The next 2 weeks might be patchy and volatile. Given Tuesday’s May Day in Continental Europe, expect Monday to be slow volume-wise with extended weekends all around. Thursday will be action-packed with ECB, auctions both in France and in Spain. French presidential contender debate on Wednesday might give clues about economic policies – but then again, why more than in the past weeks.
Very, very thin data flow until Friday’s US payrolls. Subject to all what comes up.
Germany: Mon Retail Sales fcst 0.5% YoY (after 1.7%). Wed Unemployment fcst 6.7% after 6.7%
Other EU: EZ M3 on Mon, EZ unemployment Thu, Retail Sales Fri
US: Mon Chicago PMI 60.5 fcst after 62.2, Tue Manu ISM fcst 53.0 after 53.4, Wed Factory orders -1.5% fcst after +1.3%, Thu Productivity, Claims, Friday Payrolls

Won’t be in on Monday. Next update on Wednesday.

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

Thursday 26 April 2012

26 April 2012 – "The Twist" (Chubby Checker, 1960)

26 April 2012 – "The Twist" (Chubby Checker, 1960)

Difficult to maintain a relief dynamic as seen over the last 2 days with only few hard facts to support that. The US closed on their highs, initially propelled by Europe with a final gentle pad from Ben B., who hinted that if things didn’t work out, he could still afford to buy some more bonds to be supportive (That as well helped to stabilize USTs under 2%). The whole hype and relief somehow didn’t make through the time zones and Asia closed unevenly flat, slightly plus or minus.
Europe had a tentative positive open, which turned out to be rather a sportive up / down / up, ending with a down leg at the end of the morning, as the Italian bill auction came out and as markets finalized thoughts about what might have been said yesterday.
Yes, indeed, Draghi did mention a growth compact and Merkel did mention growth, too. But, hey, that’s like mentioning to look forward to some good weather… What is there to dislike? Sheer austerity has proved not being a remedy per se, but if suddenly everyone starts to haggle in order to spread out savings and measures over time, we’re back to the onset of the crisis. That is unless the ECB, withGermany’s backing, were to open its coffers. And that is a no-go…
The last couple of days’ discussions could lead us on a slippery path, as politicians suddenly feel embolden to start trying to push the theme  “of not yielding to market pressure anymore”. But it’s not the EU that needs to be convinced, but eventually the markets. But, so be it... Twisted dynamics.

On the data front, Italian business confidence declined more than expected, to levels last seen end of 2009. Likewise, eurozone-wide economic confidence indicators missed forecasts, falling back to levels seen end of last year, when things look bleak, and before that end of 2009.

Italy raised the targeted amount of EUR 8.5bn in 6m bills at 1.77%, but the price tag, as for Spain, has been soaring from the 1.12% paid end of March.
Bill auctions pretty much never fail, given their role in bank liquidity management, and there’s not much reading into bid-to-cover ratios and attained issue size (as for bonds). These auctions are less a credit / aversion indicator as such than their price tag. For Italian 6m bills, prices remain tame, compared to 6.50% spike in November and the 3%+ price tag around that period, but we’re off the post-LTRO lows at 1.12% and 1.20% in Mar and Feb.

By midday sovereign debt across Europe had basically reverted yesterday’s ENTIRE move with Bunds down 6 bp on one end and Spain up 8bp to 5.85% on the other end. French pivot at 3% and Italy back to test the 400 bp spread to Germany.
RISK ON, OFF, ON, OFF… Still, equities down “only” 0.75% and credit only a little wider. Commodities for choice all stronger. Currency unchanged. So, we ended the morning with a bit of diverging attitudes among asset classes here.
Disappointing US jobless claims of 388k (fcst 375k) added to the pressure with equities down an additional 0.5% with another 1-2 bp added to the rotation in sovereign debt. One hour later, with the US opening about unchanged, that latest dip was digested and pending Mar home sales of 4.1% (fcst 1%) helped to stabilize things in the US to about unchanged and European equities to reduce losses (with the exception of Spain). US driven by equally twisted dynamics of “in case of further bad figures, further Ben support”.
Still, if in doubt, buy German Bunds: 2 YRS traded a new all-time low below 0.09%, 5 YRS are within 1 bp of Monday’s low, 10 YRS are back with a vengeance and the BuBa can certainly unload what it hoarded yesterday in 30 YRS with a 50 cts / 2 pb gain.

New Issues initially confined to the European Union closing its Q2 funding needs with EUR 2.7bn 10 YRS benchmark priced at MS +56, from yesterday’s 60 area initial thoughts for a minimum EUR 2bn transaction. Done and dusted in 2 hours. Good timing and execution, as the deal was covered before the mood slumped. Books grew to a healthy EUR 7bn. Had the EFSF increased its latest 20 YRS deal by EUR 1bn at MS +105.

10 YRS Yields: Germany 1,69% (-6); Luxembourg 2,21% (-4); Swaps 2,23% (-3); Finland 2,21% (-6); Netherlands 2,26% (-7); Austria 2,81% (-4); France 2,98% (-1); EFSF 3,05% (-4); Belgium 3,35% (-2); Italy 5,62% (unch); Spain 5,81% (+3).

10 YRS Spreads: Luxembourg 52bp (+2); Swaps 56bp (+3); Finland 53bp (+0); Netherlands 57bp (-1);Austria 113bp (+2); France 129bp (+5); EFSF 136bp (+2); Belgium 167bp (+4); Italy 394bp (+6); Spain412bp (+9)
Core tighter. Holland back into the “good” camp. France pivoting on 3% mark. Spain weakish.

EUR swap curve 2-5 YRS 50,7bp (+0,5); 5-10 YRS 74,3bp (+1,5) 10-30 YRS 29,4bp (+0,6).
2 YRS German BKOs closed 0,09% (-3) and 5 YRS OBLs 0,63% (-7).

Main at 143 from 141 (1,2%); Financials at 248 after 247 (0,6%). SovX at 275 from 274. Cross at 665 from 662.

Stoxx Futures at 2251 / -0,6% (from 2264) with the S&P at 1391 (+0,3% from 1386, at European close).
VIX index at 16,8 after 17,4 yesterday same time.

EUR 1,322 after 1,320                                                                                                                    
ECB deposits jumping to EUR 782bn after EUR 759bn.
Oil 103,9/119,4 (WTI/Brent) from 103,4/118,0 (+0,5%/+1,2%). Gold at 1654 after 1638 (+1,0%). Copper at 374 from 370 (+1,0%). CRB closes 302,9 from 301,4 (+0,5%). Brent back 2$ over 120 / 90 in EUR. Copper off 360 bottom and harking back to 375/80 levels. Gold reacting to QE hopes.
Baltic Dry at 1148 after 1137.
All levels European COB 17:30 CET

Tomorrow: To close the week, Italy will auction about EUR 6bn (EUR 2.5bn 5s, EUR 2.5bn 10s, about EUR 1bn 4s and 7 YRS)
German consumer conf at 5.9 fcst after 5.9. French consumer Spending (fcst -0.2% YoY after +0.5%). Spanish Retails sales and Unemployment IT retail sales. US GDP

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

Wednesday 25 April 2012

25 April 2012 – "Hippy Hippy Shake" (Big Soul, 1995)

25 April 2012 – "Hippy Hippy Shake" (Big Soul, 1995)

An AAPL a day keeps the doctor away. And obviously depression, too. There are good days and better days; and today started definitively as being from the latter category. US close ok, but nowhere near great. After-hours release of amazing sales numbers of iPods and iPads had Apple once more beat all estimates. Asia cautiously positive, but here again nowhere near the relief rebound in Europe yesterday. Eventually iPads are cool, but can’t be the sole manifestation of a global economic expansion…

European start hence on the positive side, but speeding up throughout the morning. Still puzzled by the acceleration. No fundamentals. No eco figures. Nada. Niet. A pure rebound…
Even the fact the UK is slipping back into recession with Q1 at -0.2% (fcst was a slim +0.1%) didn’t as much as dent the rebound. Ok, it did cost half a point on the Footsie (and did so for the rest of the day), but, hey, what did you expect…
On the positives, we had the ECB Q1 lending survey showing that banks were less constrained (after the LTRO)(Duh!) and started to relax lending. Good. Well, finally… EUR 1trn was no small change…

In parallel to that, Bunds remained rather stoic, knowing that the new 30 YRS auction was looming (and eventually disappointed). Looks like most of the correction had already taken place yesterday. 10 YRS opened 2 bp softer. Futures had a short-lived knee-jerk reaction when auction results came out, which were just in a lately growing list of under-covered Bund auctions (“failed” is technically not the right expression) to have happened on “RISK ON days”. EUR 2.4bn issued at 2.41% with a mere EUR 2.75bn in bids. The rest will be, as usual picked-up by the Bundesbank (as agent) for market intervention purposes. If history is a guide, the BuBa will get rid of it within days at tighter levels… Whatever. The disappointment was short-lived and, given the small amount issued, any pre-hedging might probably have had to be bought back. Ergo, Bunds back to opening levels. As counter-intuitive as the dynamic in equities.

By midday, we had most sovereign 10s trade up and tightening in to Bunds. France / Belgium / Italy down 5 to 6 bp (versus Bunds wider by 2) and Spain still on the recovery started yesterday and down over 10 bp by noon, through the symbolic 5.75% level, and tighter by 13 to Bunds, hitting, again symbolically the 400 spread mark. Equities up 2% and Credit in line with the general happiness. Note that BONOs were not able to hold below the 5.75% mark in the afternoon and trailed back a little wider.

Durable Goods figures in the US way below consensus, but prior data revised. Mortgage applications below consensus, too. Here again, only a short-lived dent in the mood. For once, US equities seem to surf on their European peers.

It was Nordic Day in the New Issues market with Finland issuing USD 1bn 5 YRS at MS +2, joined by Kommunekredit for USD 1bn 3 YRS at MS +35,, while Nordea Finland raided the EUR market for EUR 1.5bn of 7 YRS covered bonds at MS +40. Usual Nordic magic does its trick. Must have something to do with Santa and the reindeers. Or so... Or a vision of stability and solidity.
Then again, when seeing that even the Netherlands are becoming a hot bed of austerity doubters and fearless deficit spenders…. Even the EU Commission wants a 6.8% increase in its 2013 budget. You need to trust someone, anyone.
The European Union is putting a mimum EUR 2bn 10 YRS benchmark on track, after yesterday’s 7 YRS EFSF. Early talks of MS +60 area.

10 YRS Yields: Germany 1,75% (+4); Luxembourg 2,25% (+2); Swaps 2,26% (+1); Finland 2,27% (+1); Netherlands 2,33% (-1); Austria 2,85% (-3); France 2,99% (-4); EFSF 3,09% (+1); Belgium 3,37% (-4); Italy 5,63% (-3); Spain 5,77% (-6).

10 YRS Spreads: Luxembourg 50bp (-2); Swaps 53bp (-3); Finland 52bp (-4); Netherlands 58bp (-5); Austria 110bp (-8); France 124bp (-8); EFSF 134bp (-3); Belgium 162bp (-9); Italy 388bp (-7); Spain 403bp (-10).
EFSF still on the heavier side, but had tightened unduly over the last weeks and with yesterday’s supply seemingly still weighting. Not that France is back through the 3% mark and that the Dutch are closing back in on Finland. Good Spanish performance, but 5.75% and 400 to Bunds remain resistances. Too much dramatic Spanish government talk. Should rather be as quiet as Italy.

EUR swap curve 2-5 YRS 50,2bp (+3,0); 5-10 YRS 72,8bp (+1,5) 10-30 YRS 28,8bp (+1,2).
2 YRS German BKOs closed 0,12% (unch) and 5 YRS OBLs 0,70% (+3).

Main at 141 from 145 (2,4% tighter); Financials at 247 after 255 (3,3% tighter ). SovX at 274 from 279. Cross at 662 from 675 (1.9% tighter)

Stoxx Futures at 2264 / +1,7% (from 2227) with the S&P at 1386 (+0,9% from 1374, at European close). European stocks are back to last Thursday’s levels...
VIX index at 17,4 after 19,0 yesterday same time.

EUR 1,320 after 1,321. Totally unmoved.                                                                                       
ECB deposits down to EUR 759bn from EUR 768bn.
Oil 103,4/118,0 (WTI/Brent) from 103,7/118,4 (-0,3%/-0,4%). Gold at 1638 after 1648 (-0,6%). Copper at 370 from 367 (+0,8%). CRB closes 301,4 from 301,7 (-0,1%).
Interesting to see that commodities are dragging their feet up here. Somehow, RISK ON is not shared by all.
Baltic Dry at 1137, adding once more 1.9%. If it was a really tradable commodity, I’d say “very bullish”. Next resistance is at 1230...
All levels European COB 17:30 CET

German CPI fcst 2.2% (after 2.3% YoY), French job seekers (2870k fcst after 2868k), EZ eco confidence (fcst 94.2 after 94.4). Italian Biz confidence (fcst unchanged 92.1) . US jobless claims fcst 375k (after 386k) and pending homes sales (+1% fcst after +0.5% MoM).
Having Italian supply for EUR 8.5bn 6m bills

Rest of week:
Germany:, Consumer confidence on Fri
France: PPI and Cons Spend on Fri
SP Retails sales and Unemployment on Fri. IT retail sales Fri.
US: GDP and Mich conf on Fri.
Asia: Japan Industry activity Thu. Busy Fri with Indu Prod, Retail and Construction.

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

Tuesday 24 April 2012

24 April 2012 – "Flying High Again" (Ozzy Osbourne, 1981)

24 April 2012 – "Flying High Again" (Ozzy Osbourne, 1981)

Breathe in, breathe out. Uh. Recovery time! US managed to close half a point higher than in the afternoon, albeit negatively and with the S&P still stuck below the 50d MAV (1380). Asia slightly more resilient and flattish from a helicopter view.
Not much in terms of hard data. French consumer confidence actually increasing (had been expected 87 unchanged, came at 88), but that may be due to all promises given so far that things would all change after the elections. Spanish mortgages still in free-fall and by free-fall we’re talking about nearly 50% down YoY. Never attained levels so far.
Still, markets taking a breather and trying the uptick.

The Dutch bonds auction went well with some serious bottom-fishing. Having added a 25 YRS tranche to the mix, only EUR 1bn 2s were sold at the depleted 0.52% level (from 0.58% yesterday), while EUR 1bn 2037s went over the counter at 2.78% (a relatively tight 39bp over Bunds).”Bottom fishing” on that long tranche quite limited, as the latest low was only around 2.60% early march and that we had traded 2.90% mid March (when the equities traded out their highs and inflation was all the rage)(seems like a long time ago already). Whatever, strong snap back of the Dutch 2s after the auction with the later tightening 10 bp at once, taking Dutch 10s along for the ride. Storm in a water glass for the Dutch? At least for the moment, the polders are not yet flooded and players, after yesterday’s initial risk aversion, are still counting the Netherlands among the more disciplined folks. As for France, it will be needed so see and hear what promises the election campaign might bring.
Spain sold EUR 1.9bn out of an already reduced EUR 2bn target (from EUR 3bn) of 3 and 6m bills at 0.63% and 1.58% (after 0.38% and 0.84% last month). Good bid to cover, but short of the maximum amount. Bit of a relief, but at what price? O LTRO, LTRO, wherefore art thou LTRO?
Finally, Italy rounded off the supply with EUR 2.5bn of 2 YRS zeros at 3.35% (from 2.35% last month). Maximum amount, but 100bp price tag. Added some EUR 1.4bn ILBs. Gets us back about halfway between Jan (3.76%) and Feb (3.01%). O LTRO, LTRO, wherefore art thou LTRO?

All this comforted markets into a general mild recovery into the lunch period across all asset classes. Bund counter-movement from its historic lows only limited though (+3). The Netherlands and Spain 7 tighter, France 4. EFSF wider on supply. Equities up 1%, but Credit just a tick tighter. Commodities up 0.5-1% from European closing levels.
With major US figures not due until 16 CET, markets drifted sideways from there in search of further lead. Static first, slight heavier later. Lot of verbal crossfire with key words such as “fiscal treaty”, “discipline”, “austerity” and “growth” out of the different political sphere… Dutch in full force on the subject this afternoon, while we’re still awaiting some French statements. Germany sounding a hawkish horn with its Top 2 trade suddenly sounding like wanting to betray “the Force”.
(For Trivia lovers, Germany’s Top 10 2011 cumulated ex- and imports: FR, NL, CHina, US, UK, IT, A, BE, CH, PD. Source Destatis)

US figures not especially brilliant (Cons sent holding just so, house prices lower, but unadjusted sales higher), but good enough for a positive open, propelling European risk higher, in sync tick by tick to +1.5%.
It’s sovereign risk that suddenly got compressed in the afternoon with initially slower Spain and Italy joining tighter French and Dutch bonds. Spain shifting away from the symbolic 6% mark – and closing in on Italy. EFSF lagging today on supply.

Rest of the afternoon in short-squeeze mode... Odd. Seems overdone. But then again, yesterday’s bashing was probably too much, too...

EFSF shared the New Issues floor with EUR 3bn 7 YRS at MS +77 (had been mandated and marketed as EUR 3bn minimum) with French BPCE issuing a EUR 600m increase of an outstanding 10 YRS covered bond at MS +120. Finalnd, in the meantime, has announced a 5 YRS USD benchmark, which, given its funding schedule for the year, should bite further into supply and help maintain Finland tight to Germany.

10 YRS Yields: Germany 1,70% (+6); Luxembourg 2,23% (+5); Swaps 2,25% (+4); Finland 2,27% (+2); Netherlands 2,33% (-8); Austria 2,88% (-5); EFSF 3,08% (+8); France 3,02% (-7); Belgium 3,41% (-6); Italy 5,65% (-7); Spain 5,84% (-15).

10 YRS Spreads: Luxembourg 52bp (-1); Swaps 55bp (-2); Finland 56bp (-4); Netherlands 63bp (-14); Austria 118bp (-11); EFSF 137bp (+2); France 132bp (-13); Belgium 171bp (-12); Italy 395bp (-13); Spain 413bp (-21)
Spain off the sticky 6% mark. Italy below symbolic 400 to Bunds. France back to the late stable 3% area. Dutch back in grace. EFSF lone underperfomrer on supply.

EUR swap curve 2-5 YRS 47,2bp (+2,2); 5-10 YRS 71,3bp (+0,6) 10-30 YRS 27,5bp (+1,4).
2 YRS German BKOs closed 0,13% (+2) and 5 YRS OBLs 0,67% (+5).

Main at 145 from 149 (-2,8%); Financials at 255 after 262 (-2,6%). SovX at 279 from 285. Cross at 675 from 692.

Stoxx Futures at 2227 / +2,0% (from 2183) with the S&P at 1374 (+0,9% from 1362, at European close).
VIX index at 19,0 after 20,1 yesterday same time.

EUR 1,321 after 1,313                                                                                                                    
ECB deposits down to EUR 768bn from EUR 775bn.
Oil 103,7/118,4 (WTI/Brent) from 102,0/117,6 (+1,6%/+0,7%). Gold at 1648 after 1632 (+1,0%). Copper at 367 from 361 (+1,5%). CRB closes 301,7 from 298,9 (+0,9%). Happiness across the boards...
Baltic Dry at 1116, adding once more 2.4%. Had a weak start into 2012, but has become unstoppable lately.
All levels European COB 17:30 CET

Tomorrow: Not much out there…
German New 30 YRS auction (last 30 YRS offering were at 2.60% in Jan, now quoted 2.41%). UK Q1 GDP, if looking over the Channel.
US durable goods (ex trans) fcst +0.5% (after +1.8%). FOMC unchanged.

Rest of week:
Germany: CPI on Thu (fcst 2.2% after 2.3% YoY), Consumer confidence on Fri
France: Employment on Thu, PPI and Cons Spend on Fri
Other EU: EZ confidence figures on Thu.
SP Retails sales and Unemployment on Fri. IT Biz conf Thu and retail sales Fri.
US: Jobs and home sales on Thu. GDP and Mich conf on Fri.
Asia: Japan Small Biz conf Wed. Machinery orders Wed. Industry activity Thu. Busy Fri with Indu Prod, Retail and Construction. China Leading indicator on Tue.

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

Monday 23 April 2012

23 April 2012 – "Double Dutch" (Malcolm McLaren, 1983)

      23 April 2012 – "Double Dutch" (Malcolm McLaren, 1983)

Boo! Boo! Boo! Euro-depression start into the week. Weaker Asia. Weak China on 6th consecutive below 50 PMI reading (49.1 after 48.3) were just the beginning. PMI reading across Europe all on the soft side and well below estimates. EZ manufacturing PMI at 46 (48.1 fcst), Composite at 47.4 (49.3 fcst after prior 49.1), so not the hoped for uptick. German Manu PMI also a big miss at 46.3 (49 fcst after prior 48.4). French Manu just a slight miss, but important Service PMI at 46.4 (50.1 fcst from 50.1). French biz confidence likewise a miss at 95 (fcst 96 after 96, revised to 98).
To round up fundamentals, Bank of Spain Q1 estimates were down 0.5% YoY after -0.4% in Q4, tippingSpain into recession.

To round up the jitters: we’ll throw in Hollande’s lead in the first round of French elections and the failed Dutch budget talks, triggering early election talks (confirmed by the end of the day).
A little too much… Risk Off right away.
French OATs suffering an unsurprising initial knee-jerk reaction (out to 3.15% from 3.08% and then back to 3.09%), but eventually about ok, although wobbly. Stable throughout the day, but not following Germany tighter.
Further development of the spread will hinge on how low both centre candidates will need to go to pick additional voices from the extremes. Hollande (28.6%) in better position than Sarkoszy (27.2%) in initial polls (45-55). Given late retorics, doubtful that markets will apreciate.
It’s the Dutch 10s that got hammered (+10 bp at open, but with a smaller tightening back). All the while German 10s traded tighter on flight to quality. This left the Dutch –German spread 10 wider at +70 (60 on Friday, 50 a week earlier). There still some room before joining the “EZ Core Minus” club of Austria andFrance (to which Belgium starts to cling back). Unlucky timing with up to EUR 2.5bn 2 YRS to be auctioned on Tuesday.

Need another downer? The Eurostat publication of final 2011 figures: Debt/GDP Austria 72.2% (after 71.9%), Belgium 98.0% (after 96.0%), Finland 48.6% (after 48.4%), France 85.8% (after 82.3%), Germany 81.2% (after 83.0%), Greece 165.3% (after 145.0%), Ireland 108.2% (after 92.5%), Italy 120.1% (after 118.6%), Luxembourg 18.2% (after 19.1%), Netherlands 65.2% (after 62.9%), Portugal 107.8% (after 93.3%) and Spain 68.5% (after 61.2%). Nothing new, but a stark reminder of things. For completeness sake UK 85.7% (after 79.6%).
The silver lining, if there’s any, is that deficits have come down from 2010. However, as austerity triggers negative feedback loops…

Into the afternoon, equities were down 2%.5. Credit wider by 5 points. Holland and Italy spreads wider by 12 and 10, rest of Europe wider by 4 to 6 bp. 5 YRS OBLs closing at a record low of 0.61%. 10 YRS as well, when considering that the old Jan 2022 is now at 1.55% and the new 10s traded down to1.62%. Commodities down about 1.5% in sympathy.
Markets floored until US open and in absence of US figures. US equities opened down 1.5%, taking European peers to the -3% level. Credit softer, too. Spain taken up to 6% and Italy to 5.75%.
Ugly close – once more...

New Issues on stand-by. Supply of about EUR 7.4bn French bills with EUR 4bn 3m at 0.09% plus EUR 1.8bn 6m at .012% and EUR 1.6bn 0.25%, all line with healthy bid to cover ratios – but all 2 to 3.5bp more expensive than 2 weeks ago. Had incidentally as well EUR 2bn German 1-year bills sold this morning at 0.07% in comparison.

10 YRS Yields: Germany 1,64% (-6); Luxembourg 2,18% (-3); Swaps 2,21% (-3); Finland 2,25% (+0); Netherlands 2,42% (+10); Austria 2,93% (0); EFSF 3,00% (-1); France 3,09% (+1); Belgium 3,48% (+2); Italy 5,73% (+7); Spain 5,98% (+4).

10 YRS Spreads: Luxembourg 54bp (+4); Swaps 57bp (+3); Finland 60bp (+7); Netherlands 77bp (+17); Austria 129bp (+6); EFSF 135bp (+6); France 145bp (+8); Belgium 183bp (+9); Italy 408bp (+13); Spain 434bp (+11).
Periphery-like quality bashing for the Dutch debt. France eventually stable, but will need to see candidates’ view on future spending / savings.

EUR swap curve 2-5 YRS 45,2bp (-2,1); 5-10 YRS 70,5bp (+0,0) 10-30 YRS 26,1bp (-0,7).
2 YRS German BKOs closed 0,10% (-3) and 5 YRS OBLs 0,61% (-6).

Main at 149 from 144 (3,7%, in line wit equities); Financials at 262 after 255 (2,5%). SovX at 285 from 283. Cross at 692 from 675.
Main has 155 50% retracement. Cross past 686 retracement.

Stoxx Futures at 2183 / -3,1% (from 2253) with the S&P at 1362 (-1,7% from 1385, at European close).France’s CAC now negative 2% on the year. EuroStoxx -3%. Italy about -8% and Spain’s IBEX now past -20% YTD.
VIX index at 20,1 after 17,6 Friday same time.

EUR 1,313 after 1,321. Surprisingly stable – after all...                                                                        
ECB deposits up EUR 29bn to EUR 775bn
Oil 102,0/117,6 (WTI/Brent) from 104,6/119,5 (-2,4%/-1,6%). Gold at 1632 after 1645 (-0,8%). Copper at 361 from 369 (-2,0%). CRB closes 298,9 from 301,4 (-0,8%).
Baltic Dry up another 2.2% to 1090 from 1067.
All levels European COB 17:30 CET

Hmmm… More possible auction tension: Spanish 3 and 6m bills auction announced on the cautious side with EUR 2bn pencilled (versus EUR 3bn the last time)(Came at 0.38% and 0.84% one month ago). Up to 2.5bn 2 YRS zeros in Italy (2.35% one month ago). Up to EUR 2.5bn Dutch 2 YRS. The bond was trading 0.45 to 0.50% over the last month and has widened to 0.58% today.
French consumer confidence fact 87 after 87. Spanish mortgages and budget balance.
Raft of US figures with CaseShiller home prices. Consumer Conf fcst 69.6 after 70.2. New home sales fcst 320k after 313k.

Rest of week:
Once more, heading into month end, a thin week for hard data, leaving markets probably trading more on sentiment (broken) and technicals (bad). Will need to follow closely post first election round price dynamic on the French debt, as well as Italy and Spain.
Have other Italian tests with bills (Thu) and bonds (Fri). German 30 YRS on Wednesday to enhance duration…

Germany: nothing until CPI on Thu (fcst 2.2% after 2.3% YoY), Consumer confidence on Fri
France: Employment on Thu, PPI and Cons Spend on Fri
Other EU: EZ confidence figures on Thu.
SP Retails sales and Unemployment on Fri. IT Biz conf Thu and retail sales Fri.
US: Housing & Consumer Conf Tue. Durable goods and FOMC on Wed. Jobs and home sales on Thu. GDP and Mich conf on Fri.
Asia: Japan Small Biz conf Tue. Machinery orders Wed. Industry activity Thu. Busy Fri with Indu Prod, Retail and Construction. China Leading indicator on Tue.

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