22 March 2012 – “Don't Bring Me Down!” (ELO, 1979)

22 March 2012 – “Don't Bring Me Down!” (ELO, 1979)

Contraction time. Asian stocks clearly took lower Chinese PMI figures more bravely on the chin than European equities their own set of figures. Chinese PMI clocked in once in contraction territory at 48.1 after 49.6, the 5^th month in a row. While this is no good, it again triggers hope of POBC support, which is probably what kept things afloat.

A mildly softer opening in European risk assets turned into a straight sell-off as PMI sets from both Germany and France, as well as thereafter the European ones, data came lower than expected (GE Manufacturing at 48.1, with 51.0 expected after 50.2 last month, GE Services 51.8, fcst 53.1 after 52.8, FR Manufacturing 47.6, fcst 50.2 after 50.0 and FR Services unchanged at 50.0, fcst 50.3. European Manufacturing at 47.7, fcst 49.5 after 49.0. Composite and Services clocking lower, too). The feeling that the worst was over in Europe and that one would mildly expand step by step into Q1 that supported markets lately has thus been showered.

Mid-morning equities down 1.75%. Credit indices and sovereign spreads wider. EUR down 50 ticks. Bund futures back up 70 cts to mid last week’s levels, correcting all the weakness and belying the long end inflection point reflections. "The reports of my death are greatly exaggerated", as said Mark Twain. In best chartist back-trading manner, we’ll note how nicely Bunds have bounced back off the 200d MVAG in the 135.30s and Fibonacci retracement in 135.60s. Good for algo trading.

Talking of amateur chart mapping: Euro Stoxx have much failed to break the 1-year Fibo retracement at 2576 the other day. Next levels were 50d MVAG at 2488, the 1-year high/low mid point at 2452, then the post-Lehman high/low mid point at 2420, the 200d MVAG at 2392 and 100d MVAG at 2381.

Markets took a breather at lunch with equities a bit higher from their lows and Bunds a ticker lower. Italy and Spain 10 YRS widened by up to 15 bp, before getting some support. US jobless balancing slightly below forecast against slightly revised prior data (+348k, after revised +353k). Final set of figures showing weaker house prices and FEB leading indicators slightly above forecast, but here again with prior data revised lower. For what it’s worth, EZ consumer confidence improved above consensus to -19 from -20.3. Then again, “The crisis is over!” has been widely heralded to the public…

No sovereign supply. A sprinkle of SSA and domestically targeted covered bonds. ArcelorMittal’s EUR 500m 6 YRS MS+275 was the lone candidate trying to defy the gloom. Price and size pointing to limited appetite.

ECB deposits down EUR 14bn to EUR 755bn.

VIX closed 15.1 in the US and jumping down to 16.at European close. Hey, a sign of life here…

Oil remains range bound and rather resilient to the European gloom, initially just giving back the dollar gained yesterday to 106.1 / 123.3 by noon, before loosing further steam by NY open and closing 105.0 / 122.8 (from 107.3 / 124.4 WTI / Brent at European COB). Same for Gold softer to 1639 from 1653 (-0.8%). CRB down 1% on across the board commodities weakness.

Baltic Dry up 902 after 896.

10 YRS Yields: Germany 1,91% (-7); Swaps 2,35% (-2); Finland 2,32% (-4); Luxembourg 2,35% (-4); Netherlands 2,47% (-5); Austria 2,95% (-1); France 2,99% (-1); EFSF 3,1% (-4); Belgium 3,36% (+3); Italy 5,08% (+9); Spain 5,47% (+9).

10 YRS Spreads: Swaps 42bp (+4); Finland 41bp (+3); Luxembourg 44bp (+4); Netherlands 56bp (+3); Austria 104bp (+7); France 108bp (+6); EFSF 119bp (+3); Belgium 145bp (+10); Italy 317bp (+17); Spain 356bp (+16).

EUR swap curve 2-5 YRS 53,2bp (-2,0); 5-10 YRS 72,3bp (+1,0) 10-30 YRS 26,1bp (+0,2).

10 YRS sovereign yields pivoting around Core EZ minus with German Bunds on full steam on one hand and the periphery softer on the other hand. Netherlands standing out negatively in the Core EZ plus group with its spread widening to +60 (+7 bp) intraday before tightening back inn line. Markets are not really forgiving the drift away from its northern austerity stand. We’re nearing the +63 maximum print of mid November last year. At that time, Austria and France were trading +184, respectively +190. Belgium was hitting +360.

Italy past the 5% mark. Spain very rapidly nearing 5.50%

Credit closing weak after the late outperformance with Financials again wider. The wild rally in financials since breaking through 200 and testing the 180s, has been corrected in 2 rough sessions

End of day balancing out off lows as US not really joining in the risk off move and lack of follow-up weakness in absence of further negatives.

Terribly embarrassed about having said there was an ECB meeting today!!! I somehow put Frankfurt mentally on a 2-week schedule, similar to auctions, copy-pasted myself and ended with some serious calendar mistake…. Probably because missing the last meeting due to holidays two weeks ago. Questions to Draghi will have more time for developing.

Tomorrow:

France Biz confidence fcst 93 (after 92). Italy Retail sales fcst -3.4% YoY (after -3.7%). US New Home sales fcst 325k (after 321). Weekend.

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

http://www.youtube.com/watch?v=q2FXG3gdFHQ