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

27 April 2012 – "Arrested for Driving While Blind" (ZZ Top, 1976)
http://youtu.be/rDJ2rmFsEmY

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:
http://youtu.be/rDJ2rmFsEmY