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)
---
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 YellenÜber-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 – 1.261 – 1.274 – 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?????
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