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


Saturday 17 November 2012

Shuffle Rewind 12-16 Nov " No Direction " (Simply Red, 1985)

Shuffle Rewind 12-16 Nov " No Direction " (Simply Red, 1985) 

This week in review (compared to Fri 09 Nov COB): 
Click on day for related post, on title for song.

The week ending 09 Nov saw elections clearing the way for a second Obama mandate and brought the Fiscal Cliff question back into the light. While fundamental negative economic figures were mostly ignored at the beginning on the week, once Wednesday showed final results, markets started sinking. An awakening.
"Wake Up" (Bunds 1,34% -11; Spain 5,81% +17; Stoxx 2481 -2,4%; EUR 1,271 -130)

This Monday opened softer, as Europe, having sold off Friday morning was squeezed into the weekend close, before US stocks slumped back at their own close. Then again, once done, markets went rather quiet. The Periphery, while still on the soft side, mainly trailed a generally softer Risk sentiment, somehow waiting for the US to “Show Me The Way" (Bunds 1,34% unch; Spain 5,88% +7; Stoxx 2473 -0,3%; EUR 1,271 unch), despite looming European problems (mainly Greece). As Greek discussions overnight revealed a spat between Europe and the IMF, and given yet another closing slump in the US, Tuesday started on a weak footing with Risk nearing Friday lows, before being ramped up by rumours, showered again and finally supported by the US opening in negative, albeit tame manner, before moving into positive territory and taking everything along. Given the noon despair, the afternoon relief seemed…exuberant. Especially as the US still led the way, "That's The Way" (Bunds 1,34% unch; Spain 5,83% -5; Stoxx 2494 +0,8%; EUR 1,272 +10). Wednesday was another case of Lather. Rinse. Repeat. See-sawing – and looking for direction. Weaker open, in line with the US close. Some exuberance ahead of the Italian auction, despite negative figures. Awakening that nothing was justifying this. Re-correction. Some more European gloomy news to end the day. Mostly an equity move, although Spain got slammed. "Way Down" (Bunds 1,34% unch; Spain 5,92% +9; Stoxx 2475 -0,8%; EUR 1,274 +20). Trashy US close on Wednesday evening, resilient Thursday open in Europe. Saved by the gong – and slightly better than expected GDP figures in France, Germany and Italy. Still, once that said and despite this resilience, Europe kept looking for a lead, but no one really knows who’s leading whom these days: "Are You Gonna Go My Way?" (Bunds 1,34% unch; Spain 5,89% -3; Stoxx 2459 -0,6%; EUR 1,279 +50). Friday was eventually mostly boring: Several inconclusive downside tests in European equities, with static bonds, unwilling to tighten further. More US equity weakness, more downside. Afternoon US equity dump. Again with Credit, EGBs, most commodities just watching. Dismal European close. "That's the Way (I Like It)" (Bunds 1,32% -2; Spain 5,86% -3; Stoxx 2429 -1,2%; EUR 1,270 -90). 5 minutes after EU close, the US market was spun around by initial Boehner comments, interpreted as ways could be found on the Fiscal Cliff issue. To be followed.
While the prior week was marked by some kind of awakening, this week was more about finding a direction. Eventually mostly downwards, but always in jumps, marked by tentative rebounds. Europe mostly lost, so unused not to be the focal point anymore, waiting for US input. If it wasn’t for the Fiscal Cliff, and in absence of further news out of the Periphery, we seem to have
"No Direction" (Bunds 1,32% -2; Spain 5,86% +5; Stoxx 2429% -2,1%; EUR 1,270 -10) 

After several very strong weeks for bonds, it seemed quite difficult to keep that drive, at least for the Hard Core, which by and large refused to react to equity weakness. With remarkable and rare consistency, Bunds closed at 1.34% (last Friday’s closing level), every single day this week with rare “spikes” to 1.32% lows and sometimes even 1.365% highs, for a change. Eventually closed at 1.32%, but only because the US fell out of bed.
German Schätze stayed in negative territory, as well in restricted volatility.
In the meantime, swaps and Soft Core (Austria & Belgium) traded new historic lows this week with France nearing, too, its August lows of 2.055%. French 2 and 5 YRS were auctioned at historic lows this week, as were Dutch 10 YRS. Belgium still doing great at 17 over France (unchanged) and down to B+93 (from 96 last week).

Periphery still bobbling up and down, but with not much of an own dynamic these days. It’s more a case of going with the general Risk assessment. Breaching symbolic levels for a while (5% for Italy, B+450 for Spain with 10s just under 6%) didn’t trigger much of a panic. Wednesday 12m bills auction went well in Italy, while Wednesday’s test to renter the very long end was just so so. Auction results were very good price-wise, rather doubtful demand-wise. Looked like being sponsored and put off the market for a while. Eventually digested and with Italy showing better than expected GDP numbers (or rather less bad), demand for BTPs seemed to pick up again. Spain drifting on its own and performing so so on the week (+7, -5, +9,-3,-3. Overall +5 at 5.86%, B+454). Italy (+ 7 to past 5%, -6,-unch Wed,- 7, -2. Overall -10 to 4.87% or B+355). For both, symbolic pain levels at 5 and 6% have been avoided to end the week.
Short end mostly uninspired, too, closing at 2.06% and 3.22%. Italian 2-10s at 281bp (-5) and Spanish equivalent at 264 (-8) with the flattening coming from the overall 10 YRS strength.

EUR swap curve out to 10 YRS at historic lows, again.
2-10s at 127 after 128, but just in the last hours of the week. Some ROff with 10-30s at 61 from 58.

Credit once more overdoing Risk swings and still decompressing for overly tight lows a couple of weeks ago. Out by some 5% versus equities down slightly over 2%. As for the Periphery, mostly static with some re-adjustments in jumps. Lacks own dynamic. 
Having closed the prior week down 2.4%, European equities remained mostly rangy, around / slightly below the 50d average and trailing the US (+0.3%, +0.8%, -0.8%, then a heavier -1.2% and a dismal -2.1% on Friday ). Might see a positive gap on Monday, depending on weekend news as the Europe closed LOD/LOW – just some 5 minutes before US equities were turned around, closing some 1% higher than at 17:30 CET.
VIX now confirmed over the 18-mark for a while - yet still far from panic levels.

European 50d & 100d: EStoxx 2514/2435 (50d/100d), DAX 7285/7035, CAC 3453/3392, MIB 15683/14991, IBEX 7857/7423.
US 100d& 200d for INDU 13123/12992, SPX 1405/1382 and NASDAQ 3015/2985, as totally Apple-challenged (200d 595).
50% INDU retracement of the Oct 2011 – Oct 2012 at 12.447. S&P at 1317. NASDAQ 2819 (broken 17:25 on Friday, 10 minutes before being sharply spun around).

Very stable EUR, which has obviously lost its Risk Off indicator function, at least for now. Has actually been profiting from US ROff – until a sharper Friday correction. Stuck in charts. 
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.

Commodities absolutely uninspiring on the week. Oil reacted duly to Middle-East tensions… up $ 2-3…for a day… then back. Gold managing to hold above the 1700-mark, but heavy.

New Issues rather uninspiring with EUR 12.5bn printed in 17 benchmarks (down from EUR 14.7bn last week). Highlight was Xstrata’s 2-trancher for EUR 1.25bn May 2016 at MS +100 and EUR 1bn 6 YRS at MS +140. Note as well IBM with EUR 1bn 7 YRS at MS +20, as well as the return of an Irish Bank in covered bond format after 3 YRS with BOI going for EUR 1bn 3 YRS at MS +270. Irish utility ESB was in the markets, too, with EUR 500m 7 YRS at MS +320.

Outlook: More of the same? Certainly. There isn’t much in terms of European data until next week’s Thursday, which will be PMI day. Wednesday crowded US 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. Spailout & Grexit
Fiscal Cliff always good for a market move in the coming weeks. US (and EU) Fri equity close up for interpretation chart-wise. Avoided real 50% retracement breach on the NASDAQ, but just so. Despite this rebound, the US was markedly down.
Light week auction week: Tue 12 & 18m Spanish bills; Wed 10 YRS Bund increase and Portuguese bills; Thu 2015 2017 & 2021 BONOs. Thus, all eyes on Spain.


On the week (compared to Fri 09 Nov COB): 
10 YRS Yields: Germany 1,32% (-2); Luxembourg 1,47% (-2); Netherlands 1,58% (-3); Finland 1,60% (-3); Swaps 1,66% (-2); EU 1,70% (-3); Austria 1,77% (-3); EIB 1,86% (-3); EFSF 1,98% (-2); France 2,07% (-5); Belgium 2,25% (-5); Italy 4,87% (-10); Spain 5,86% (+5).

10 YRS Spreads: Luxembourg 15bp (unch); Netherlands 26bp (-1); Finland 28bp (-1); Swaps 34bp (unch); EU 38bp (-1); Austria 45bp (-1); EIB 54bp (-11); EFSF 66bp (unch); France 75bp (-3); Belgium 93bp (-3); Italy 355bp (-8); Spain 454bp (+7).

EUR swap curve 2-5 YRS 46bp (unch); 5-10 YRS 81bp (-1,0) 10-30 YRS 61bp (+3,0).
2 YRS German BKOs closed -0,052% (-2) and 5 YRS OBLs 0,34% (-2), on the week, with UST closing at 1,56% (-6).
Swiss 2-YRS were as uneventful as Schätze and closed at -0.25% from -0.257%.

Main at 139 from 132 (5,3% wider); Financials at 188 after 180 (4,4% wider); Cross at 572 from 534 (7,1% wider).
Stoxx Futures at 2429 / -2,1% from 2481 with S&P minis at 1344 / -2,7% from 1382, at European COB last week.
VIX index at 18,3 after 18,0 last week.

Oil 86,9/108,2 (WTI/Brent) from 85,7/108,0 (+1,4%/+0,2%). Gold at 1711 after 1734 (-1,3%). Copper at 343 from 343 (+0,0%) . CRB closes 293,0 from 292,0 (+0,3%).
BDIY finally ended its 2-week slide from the latest 1048-high with a healthy 10.2% rebound to 1036 from last Friday’s 940.
Intermediate 2012 high (post-Chinese New Year) was at 1165 early May after a 10-year low at 647 early Feb, 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. Seems to point to around 1000 as balanced level, from a seagull view.

EUR 1,270 after 1,271 last Friday

Greek guesstimate: Greek bonds back to 17.25% for 2023s and 14.50% for 2042s, 75bp tighter from last week’s closing at 18% and 15.5%, as haggling remains on-going and can kicking alive.

All levels Friday COB 17:30 CET

Fast-forward Macro and Events: 
PMI week. There really isn’t much in terms of European data until next week’s Thursday, which will be PMI day.
Wednesday crowded US data dump ahead of Thu 22 Thanksgiving holiday.
Light week auction week: Tue 12 & 18m Spanish bills; Wed 10 YRS Bund increase and Portuguese bills; Thu 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
CH: Thu HSBC PMI

Click link under title or below for today’s musical support: 
Quite proud of my “Royal Flush” with songs containing “Way” in the title last week. All these different ways, but No Direction 


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)
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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
CH: Thu HSBC PMI

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.


Thursday 15 November 2012

15 Nov 2012 – “ Are You Gonna Go My Way? ” (Lenny Kravitz, 1993)

15 Nov 2012 – “ Are You Gonna Go My Way? ” (Lenny Kravitz, 1993)



The US crashing close yesterday was cushioned in Europe by better than expected (backward-looking) GDP figures in Germany and France. EZ in recession nevertheless. Limited fall-out, albeit lower (equity) levels tested. Periphery okay’ish, then good on better Italian GDP. Spain tag along with limited own dynamics, mainly trailing Risk assessment. EGBs difficult to move lower from here. Watching the US. Someone. Please. Show the way.
"Are You Gonna Go My Way? " (Bunds 1,34% +0; Spain 5,89% -3; Stoxx 2459% -0,6%; EUR 1,279 +50)
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As somehow to be expected, the US markets closed down, as the rally during the EU afternoon session just fizzled out and with the last trading hour pushing indices back into negative territory. Wasn’t that a comfortable Copy-Paste from yesterday??? Ok. Never mind. We didn’t even have a morning rebound yesterday. The rest remains valid. It is the fifth sixth day in a row that we get such a bump and a sell-off into the close. FED YellenÃœber-dove minutes pitching ZIRP until 2016 – or indefinitely. US equities down 1.4%. NASDAQ now in “correction”-territory (-11.1% from 05 Oct top, post-Lehman high).
Asia down a good 1%-1.25% on the back of the US – with the exception of Japan ripping 2% higher on new elections / JPY weakness (81 against 79.5 yesterday morning). Why bother with all these QE attempts? Just announce new elections. Much more efficient!
Note Shanghai nearing its 2.004-low (26Sep) fast. A test below the 2000-line (1.990 on 23 Jan 2009) is thus just a cough away.

Q3 GDP figures were surprising by their resilience in France, squeezing out 0.2% QoQ (fcst flat after flat, revised -0.1%) for +0.2% YoY (after rev. +0.1%), and in Germany, too, at +0.2% QoQ (fcst +0.1% after +0.3%) for +0.9% YoY. (nsa YoY only at +0.4%, though). Italy, too, did, better than expected in Q3 with QoQ at -0.2% (fcst -0.5% after rev. -0.7%), -2.4% YoY unchanged after upwards revision. Spain confirmed at -0.3% / -1.6%.
Note that outside the biggest four economies, weakness is spreading in the AAA-area with Finland (-1% YoY), Austria (-0.1% after rev. +0.1%), for a first dip since 2008, and especially the Netherlands (Fifth biggest) crashing -1.1% QoQ, a point worse than consensus / -1.6% YoY.
French and German resilience should not be over-stated, as all past summer data did surprise as being rather more resilient than expected (including in the Periphery), so are thus the GDP numbers. However, latest forward-looking data and next week’s PMIs might actually show that the summer was indeed more like the little hill-top you climb on a roller-coaster - before the final dip.
Final EZ Q3 GDP less a kicker and on forecast at -0.1% after -0.2% QoQ and -0.6% after rev. -0.4%, and hence formally entering into recession. Oct CPI at +0.2% after +0.7% and thus 2.5% unchanged YoY.
ECB forecasters’ survey shows 2012 Growth revised to -0.5% (from -0.3%), 2013 halved to +0.3% (from +0.6%). 2013% CPI +1.9% (from +1.7%). 2013 Unemployment raised to 11.6% from (11.4%).

Europe duly opening in the red given the US lead, with pre-open futures down 0.75%-1% from COB, but definitively in rebound mood, as the US fall out is cushioned by the GDP figures.
Half an hour into the session, EGBs were eventually unchanged after a tentative tick-up in Bunds at open. Bunds 1.34% unchanged. UST 1.60% unchanged. Soft Core a tick better, having closed a little soft yesterday. Italy unchanged across the curve with 10s at 4.96%. Spain a bit softer with 2s out by 5 to 3.25% and 10s at 5.93% (+1).
Equities down 0.5% from COB. Credit unchanged to a touch weaker. Commodities eventually just drifting side-ways with Oil surprisingly stable (+0.5%), despite Middle-East tensions. EUR 10 pips better at 1.275.

REU Rehn on the ticker. More brinkmanship on Greece (but without touching the debt principal…).
Yesterday’s EU pat on Spain’s shoulder was seemingly not yet seen as an invitation to Spailout. Spanish press reports that the government might check an “IMF-only” aid. If confirmed, THIS, in my eyes, would be a major slap to Germany’s and the ECB’s, as well as the EU’s face: Basically, it would mean that Spain is demanding solidarity, only in an uni-directional way, without being willing to give up any single bit of sovereignty (a subject dear to Germany). Of course, this news was denied later in the morning. And no Spanish decision has yet been made, anyway.

French auction with EUR 2.5bn 2 YRS Sep 2012 at 0.10% (COB 0.115%, last 0.12% in Oct), EUR 2.1bn OAT Apr 2015 at 0.16% (COB 0.19%) and EUR 2.8bn 5 YRS BTANs Jul 2017 at 0.76% (COB 0.775%, last 0.92%). Good bid to covers. Record lows.
Ireland issued EUR 500m 3m bills at 0.55% (last 0.70% last month) (with the help of Fitch raising its BBB+ outlook to stable from negative last night).

Having duly reacted to the US close, happily reacted to initial French and German GDP figures, re-thought the matter and listened to the various pep talks that the worst was now over, market settled midday between low open and morning highs in slight-only Risk Off-mode: Equities down 0.5%, Bunds a bit firmer, Spain a bit wider.
EUR movements are interesting as they seem growingly disconnecting from being a short-term ROff indicator. Fiscal Cliff & Co.

By noon, Bunds were back to 1,35% (+1), OBLs 0,37% (unch), BKOs -0,033% (unch) with UST at 1,61% (+1).
Spanish 2s 3,23% (+3), 10s 5,90% (-2). Spanish 2-10s 267bp (-5).
Italian 2s 2,09% (-2), 10s 4,93% (-3). Italian 2-10s 284bp (unch).
EUR 1.276. Commodities still up 0.5%. Gold a touch lower. Credit flat. Equities down 0.5%.
Waiting for US input. Once more… In the meantime, Periphery bonds recouped losses and started performing, leading to some odd ROff in equities, ROn in Periphery, slightly softer Core EGBs. Odd picture. Spain, again, forcefully pretending it hasn’t made any decisionon Spailout.

US figures disappointing with CPI ex at +0.2% (fcst unchanged) +0.1% and YoY at +2.2% (fcst +2.1% after 2%). Empire MfG was better than expected at -5.22 (fcst -8 after -6.16). However, the worst miss were Jobless Claims at rising to 439k (fcst +375k after 355k, rev. 361). Continuous claims at 3334k (fcst 3181k after 3127k, rev. 3163k). Sandy, obviously, DID have an impact.
Did push down European equities nearly half a percentage point lower, before recovering from the shock.
US hesitant cash open on flat levels still revealing European equities still outperforming the US a good half percentage point.
Surprising resilience…As if the fact that US equities were not tanking right away at open was sufficient to catch some more European risk.
Readying for yet another attempt to ramp up Risk in the second half of the European session, before plunging in the second half of the US session?

Europe on the slide, as soon as US equities turned negative and retested yesterday’s (closing) lows, with Philly Fed at -10.7 (fcst +2 after 5.7) the last (short-lived) nail in market composure’s coffin. Rebound and then back into lock-step, tick for tick. Who’s leading who? Europe the US with the latter taking a lead from Europe taking a lead from the US? Fiscal Cliff versus Periphery woes. EUR now taking strength from US equity weakness.

Odd day again. EGB sluggishness, despite lower equities and (much) softer Credit (, which had been quite resilient yesterday, though). Periphery having a good day on their own with the exact trigger quite unclear (More buyers than sellers?)(Duh!).
European equities eventually quite resilient at -0.6% with the US at LOD for a second time around European close (INDU -1.2% from Wednesday European close).
Bunds closed at 1,34% (unch), OBLs at 0,36% (-1) and BKOs -0,041% (-0,8) with UST at 1,59% (-1).
Spanish 2s at 3,22% (+2), 10s at 5,89% (-3). Spanish 2-10s 266bp (-6).
Italian 2s at 2,07% (-4), 10s at 4,89% (-7). Italian 2-10s 282bp (-2).
Yesterday’s Italian auction paper still under water, though, at 2.71%, 4.85% and 5.36% against (Auction levels of 2.64%, 4.81% and 5.33%. Closed at 2.75%, 4.90% and 5.39% yesterday).
EUR getting stronger at 1.279. Commodity price action very controlled, again, given ME tensions. Brent up 1.5%. Flight-t-quality Gold dim at best. Surprising.
All very puzzling, if you ask me.

Take-away: The US crashing close yesterday was cushioned in Europe by better than expected (backward-looking) GDP figures in Germany and France. EZ in recession nevertheless. Limited fall-out, albeit lower (equity) levels tested. Periphery okay’ish, then good on better Italian GDP. Spain tag along with limited own dynamics, mainly trailing Risk assessment. EGBs difficult to move lower from here. Watching the US. Someone. Please. Show the way.

Outlook for tomorrow: More of the same? No real European data. US Industrial Production fcst +0.2% after +0.4% and Capacity Utilization fcst 78.3% unchanged. US close. Fiscal Cliff. Spailout & Grexit.

European 50d & 100d: EStoxx 2517/2431 (50d/100d), DAX 7293/7033, CAC 3459/3387, MIB 15721/14958, IBEX 7867/7408.
US 100d& 200d for INDU 13123/12993, SPX 1404/1382 and NASDAQ 3016/2984, 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.

New Issues mixed bag with Xstrata warmly received, showing that the commodities story is not over yet, issuing EUR 1.25bn May 2016 at MS +100 and EUR 1bn 6 YRS at MS +140. French La Poste rose EUR 750m 12 YRS at MS +90, while Italian Iccrea Banca managed to get EUR 350m 2 YRS senior going at MS +370.


Closing levels:
10 YRS Yields: Germany 1,34% (unch); Luxembourg 1,47% (unch); Netherlands 1,61% (+1); Finland 1,62% (+1); Swaps 1,67% (+1); EU 1,71% (unch), Austria 1,77% (-1); EIB 1,87% (unch); EFSF 1,99% (unch); France 2,08% (-1); Belgium 2,25% (-2); Italy 4,89% (-7); Spain 5,89% (-3).

10 YRS Spreads: Luxembourg 13bp (unch); Netherlands 27bp (+1); Finland 28bp (+1); Swaps 33bp (+1); EU 37bp (unch); Austria 43bp (-1); EIB 53bp (unch); EFSF 65bp (unch); France 74bp (-1); Belgium 91bp (-2); Italy 355bp (-7); Spain 455bp (-3).

EUR swap curve 2-5 YRS 46bp (+1,0); 5-10 YRS 82bp (unch) 10-30 YRS 60bp (unch).
2 YRS German BKOs closed -0,041% (-0,8) and 5 YRS OBLs 0,36% (-1).

Main +5 to 136 (3,8% wider); Financials +4 to 186 (2,2% wider); Cross +25 to 561 (4,7% wider).
Stoxx Futures at 2459 / -0,6% (from 2475) with S&P minis at 1349 (-1,2% from 1366, at European close).
VIX index at 18,0 after 16,9 yesterday same time.

Oil 86,1/110,8 (WTI/Brent) from 86,0/109,3 (+0,1%/+1,3%). Gold at 1716 after 1729 (-0,8%). Copper unchanged at 346. CRB COB 294,0 from 292,0 (+0,7%) at EU.
BDIY, up 13 to 1024 (+1.3%)
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 1,279 from 1,274

Greek guesstimate: Greek bonds unchanged at 17.50% for 2023s and 14.75% for 2042s.

All levels COB 17:30 CET

Fast-forward Macro and Events:
US IP on Friday.
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.

EZ: Fri Cars last -10.8%; 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: Fri Oct Industrial Production fcst +0.2% after +0.4%, Utilization fcst 78.3% unchanged; Mon 19 Home Sales; Tue 20 Housing Starts and Permits; Wed 21 PMI, Claims, U Michigan, Leading Indicators. Wed 22Thanksgiving
CH: Thu HSBC PMI

Click link under title or below for today’s musical support:
Hmmm… So who’s leading whom and where to?????