10 Dec 2012 – “ Uh...Uh
- Bingo Bongo ” (Adriano Celentano, 1982)
Surprisingly stable Risk. BTPs shot down in
style. Italy? Down. Chinese data? Partially weak. Japan? In recession. French
data? Weak. German data? Strong. Wow! Better have Friday’s PMI numbers really
good. Analysts having to reinvent themselves once more as political experts to glare
into a smoky crystal ball… Italian contagion contained, for now. Uh…Uh…!
"Uh...Uh - Bingo Bongo " (Bunds
1,30% unch; Spain 5,54% +9; Stoxx 2598 +0,0%; EUR 1,293 -20)
---
The US closed mixed on Friday, slightly
above European closing time levels, ending a rather low volatility week (except
for Apple), still looking for an answer to the Fiscal Cliff issue. UST remained
on the heavier side after the NFP, closing the day up 5 at 1.62%.
Chinese early month data dump for November
on the disappointing side with the trade balance shrinking to USD 19.6bn (fcst
USD 26.9bn after USD 32bn), as exports grew a paltry 2.9% (fcst +9% after
11.6%) and Imports stood at flat (fcst +2% after +2.4%). CPI was tame at +2
(fcst +2.1% after +1.7%), PPI slid 2.2% (fcst -2% after -2.8%). IP grew 10.1%
(fcst 9.8% after 9.6%) and Retails Sales were in line at +14.9% YoY (fcst
+14.6% after 14.1%). Japan in technical recession with Q3 -0.9% QoQ /3.5% YoY
and Q2 revised to -0.1% from flat.
Monti’s resignation announcement with early
elections probably to take place in February or March didn’t have much of an
impact on the Asian session, which was mostly flat to slightly positive with
China still standing out on the stronger side (+1%), continuing the bounced
back started last Wednesday, and trading on better IP and Retail Sales,
ignoring trade balance woes.
French biz sentiment at 91 (fcst was 92
unchanged) on really soft IP at -0.7% (fcst +0.2% after -2.7%) MoM / -3.6% YoY
and Manufacturing at -0.9% MoM (fcst -0.1% after revised lower -3.4%) / -4%
YoY. There goes Montebourg’s call for French products… Can’t buy, if not
produced.
At least German trade remained solid with
Exports up 0.3% (fcst -0.3% after rev. -2.4%) and Imports up a solid +2.5%
(fcst +0.4% after rev. -1.4%). Finnish IP better at +0.% (fcst -0.5% after
sharply revised lowed -1.1%)
So, now, Italy… Si, claro! For once lately,
markets opened unsurprisingly on the soft side with some serious Risk Off on
the Periphery.
Italian 10s spiking out by over 30bp to hit
initially 4.85%, dragging Spain along (+13 to 5.58%). Similar picture on the
short end with Italy out by
20 and past the 2%-mark to 2.04% with Spain +10 and past the 3%-mark to
3.03%.
OMT
virtual support fading, at least on Italy, as no one would be there to credibly
sign off any “conditionalities”. Ah. Tough one. Wasn’t thought that way.
Bunds 3 tighter to 1.27%, along with most
other EGBs. German 2s flirting with -0.9%.
Equities down 0.75% on ESToxx with Italy down 2%, Spain
over 1% and Germany
a small quarter.
EUR pushed to the 29-line. Commodities
slightly firmer.
Talking of Italy and bad news: Oct IP was
worse than expected at -1.1% MoM (fcst -0.3% after rev. -1.3%) / -6.3% YoY wda.
Unfortunately, timing-wise, the Bank of
Italy published today that Italian banks were holding a record amount in BTPs (p. 34) of EUR 340bn in October (+ EUR
13bn on the month and an impressive +EUR 121bn since Oct last year) – and there
comes your negative loop back on the table… And the long, very long LTRO
shadows. And Italian bank shares down the drain (down 6-7%).
At least the EZ Sentix was in line, showing
a slight recovery to -16.8 (fcst -16.9 after 18.8), the highest since sentiment
started to sink in Q2/2012 (low was -30.2 in Aug).
The Greek buy-back is supposedly doing
fine, but was extended until tomorrow noon, boosting bonds the extra mile, up to
42 mid (+125) (13.76% -39bp) for the 2023s and 31.25 (+25) (11.63% -8bp) for
the 2042s. Interesting comment in the official statement: “Investors should bear in mind that even if Greece accepts all bonds tendered
in the Invitation, it will continue to engage with its official sector
creditors in considering further steps to put its debt on a sustainable path.
Future measures may not involve an opportunity to exit investments in
Designated Securities at the levels offered for this buy back.”
Does
this mean that having burnt out the PSI, next will be the OSI - with no further
mercy for private holders?
In any case, EUR 27bn supposedly already on
the table with the rest, if must be, possibly coming from Greek banks. Yeah, they’ll be recapitalized someow at some
stage…
“Bills-only Monday”: EUR 2.2bn sold in 3
and 6m Dutch bills at -0.041% and -0.040%, a record low for the 6m tranche,
(from -0.034% and -0.016%), next to the weekly French auction for about EUR 6bn
3, 6 and 12m bills at -0.026%, -0.015% and -0.012% (from -0.22%, -0.008% and
+0.016%).
This is the first time ever France has gone
negative in 12m bills. Bunga, gracie
mille! Signed, Mosco. Uh…Uh!
Belgium for EUR 1.4bn 3m & 12m, Greece
for some chunky EUR 2.125bn 4-week and EUR 1.25bn 6m bills tomorrow, next to
Spanish EUR 3.5bn 12 & 18m (Last 2.80% and 3.03% ¡Ay ay ay!), next to Austrian bonds 2019 (COB 1.025%) and 2022s (1.700%).
Italy’s EUR 6.5bn 12m bills sales on Wed
won’t probably come cheap either (last 1.76%) and Thursday was supposed to see
a new Italian 3 YRS, but this might be postponed for something less watched
than a new benchmark. Uh…Uh!
Spain intended to go ballsy this week with
bonds to be issued, next to 3 and off-the-run 5 YRS, a retap of the 4.90% 2040
(6.135% at COB tonight) announced for Thursday. Choice maintained, however for
a safer EUR 2bn-size. Ah…Ah!
New Issues a trickle with the Belgian
strategic oil stock operator Apetra issuing EUR 300m 8 YRS at Belgium +43 / MS
+80 next to unrated Finnish forest manager Tornator with EUR 250m 7 YRS at MS
+200.
Midday picture showing further increased
pressure on Italy, especially with the short-end slipping (and Spain 15 wider
on average, by domino), while the intial bid on EGB eventually was zoomed on
the Hard Core, leaving the Soft Core unchanged to weaker (for Belgium). Schätze
zooming in on all-time lows.
Equities down about 1% (spread from Italy -3.5% to Germany
-0.4%). Credit wnapping 2.5% wider with
Financials 5% softer. US futures about unchanged, though.
Bunds 1,27% (-3), OBLs 0,27% (-2), BKOs
-0,095% (-1,5). UST 1,60% (-2).
Spanish 2s 3,07% (+14), 10s 5,61% (+16).
2-10 YRS spread 254bp (+2).
Italian 2s 2,28% (+44), 10s 4,84% (+31).
2-10 YRS spread 256bp (-13).
EUR stable in the low 29s, but Commodities
firming up with Oil 0.75% better. Gold likewise. Copper surfing on Chinese good
mood and up 1.5%.
No US
figures to start the day nor later to entertain folks. Still, getting equities
to crawl back upwards with a EUR regaining some colours at 1.294 and French and
German equities back to flat. Periphery bonds regaining a couple of basis
points, although not their composure.
US cash open ok, about a 0.25% firmer than
Friday European COB, giving European peers a bit of a leg up to close the day,
with as well Milan reducing losses to -2.4% from -4% around noon.
Very uncomfortable situation with Italy. No
one there to realistically sign off any support call, if needed. Initial quick
analyses putting Berlusconi way behind in the polls were a mere consolation.
And hopes that Monti might go for some social-democratic left-centre-right
solutions are so paved with uncertainties that any electoral spin might be interpreted
the way the markets feel that day. Very refreshing. And not like in cool
refreshing… Hence, the lack of recovery during today’s session, unlike on
Friday.
Situation confirmed with Monti stating at
the end of the afternoon he wouldn’t run, acknowledging, too, that there was a
risk of populism on economic or European issues, while hoping this could be
avoided during the campaign. Uh…uh!
Late afternoon and close confirming the
impression that EGBs seem reluctant to move tighter from here, at least for the
moment with the underlying Risk strength (ex
Periphery bonds and equities) and with no full-scale panic out there.
Bunds closing off tightest levels, as
everyone else.
US markets being opened a total side-issue today,
especially as totally static. EStoxx futures closing eventually unchanged to a
tick.
Credit recovering in Main (closing just 1
wider), but Financials a little shaken (+5, 3.3% wider), Crossover stable in
that environment.
Bunds closed at 1,30% (unch), OBLs at 0,30%
(+1) and BKOs -0,078% (+0,2). UST at 1,62% (unch) COB.
Spanish 2s at 3,05% (+12), 10s at 5,54% (+9).
2-10 YRS spread 249bp (-3).
Italian 2s at 2,18% (+34), 10s at 4,81%
(+28). 2-10 YRS spread 263bp (-6).
Greek bonds closing in stellar manner,
adding 50 ticks from noon: up to 42.50 mid (+175 to Fri) (13.58% -57bp) for the
2023s and 31.75 (+75) (11.49% -22bp) for the 2042s.
Not much going in the EUR for the moment.
Italian contagion just as much as bay as with equities. Commodities eventually
firming up a little.
Take-away: Surprisingly stable equities.
BTPs shot down in style. Italy?
Down. Chinese data? Partially weak. Japan?
In recession. French data? Weak. German data? Strong. Wow! Better have Friday’s
PMI numbers really good. Analysts having to reinvent themselves once as more
political experts to glare into a smoky crystal ball… Contagion contained, for
now. Uh…Uh…!
Outlook: Same on the menu. Sideways
upwards, subject to Fiscal Cliff discussions and Italian bunga interventions.
Spain hurting, if Italy weakens further. EGBs looking tight and rather
unwilling to shed much more yield, unless real panic spreads. Equities
amazingly aloof.
ZEW survey tomorrow. Needs to show a brave
Germany. Spanish 12m and 18m bill sales.
European
50 & 100d averages: EStoxx 2517/2479, DAX 7285/7156, CAC 3462/3441, MIB
15581/15253, IBEX 7816/7591.
US
50, 100 & 200d averages: INDU 13147/13156/12999, S&P 1417/1413/1386,
NASDAQ 3006/3024/2988 with AAPL at 600/623/601.
EUR: 50d 1.292, 100d 1.275 & 200d 1.278.
Fibo retracement (of May 2011 1.494 & Jul 2012 1.204 down-leg) at 1.273 &
1.315, then 1.349 (50%).
Closing
levels:
10 YRS Yields: Germany 1,30% (unch);
Luxembourg 1,39% (+1); Netherlands 1,53% (+1); Finland 1,56% (+1); EU 1,58% (unch);
Swaps 1,58% (unch), Austria 1,70% (+1); EIB 1,75% (unch); EFSF 1,87% (+1);
France 1,95% (unch); Belgium 2,11% (+2); Italy 4,81% (+28); Spain 5,54% (+9).
10 YRS Spreads: Luxembourg 9bp (+1);
Netherlands 23bp (+1); Finland 26bp (+1); EU 28bp (unch); Swaps 28bp (unch);
Austria 40bp (+1); EIB 45bp (unch); EFSF 57bp (+1); France 65bp (unch); Belgium
81bp (+2); Italy 351bp (+28); Spain 424bp (+9).
EUR swap curve 2-5 YRS 44bp (unch); 5-10
YRS 82bp (unch) 10-30 YRS 68bp (-2,0).
2 YRS German BKOs closed -0,078% (+0,2) and
5 YRS OBLs 0,30% (+1).
Main +1 to 120 (0,8% wider); Financials +5
to 158 (3,3% wider); Cross +2 to 482 (0,4% wider).
Stoxx Futures at 2598 / +0,0% (from 2597)
with S&P minis at 1420 (+0,5% from 1413, at European close).
VIX index at 16,2 after 16,5 yesterday same
time.
Oil 86,4/108,1 (WTI/Brent) from 86,2/107,0
(+0,3%/+1,0%). Gold at 1713 after 1701 (+0,7%). Copper at 370 from 365 (+1,4%).
CRB at EU COB 295,0 from 296,0 (-0,3%).
BDIY ticking lower, again, and again: -3%
to 937 from 966. The last dip from the post-Summer high of 1109 in Oct was
halted at 916.
Upcoming
Chinese New Year (10 Feb 2013)…
EUR 1,293 from 1,295
Greek bonds closing in stellar manner,
adding 50 ticks from noon: up to 42.50 mid (+175 to Fri) (13.58% -57bp) for the
2023s and 31.75 (+75) (11.49% -22bp) for the 2042s.
Buy-back price proposal: 38.1-40.1% &
30.2-32.2%
All levels COB 17:30 CET
Fast-forward
Macro and Events:
ZEW Sentiment on Tue, especially flash PMI
releases on Fri 14 everywhere.
For the US, FOMC on Wednesday, Retail Sales
and IP next Friday.
Spain and Italian bonds on Thursday.
EC: Tue ZEW Sentiment, Wed IP fcst +0.3%
after -2.5% MoM sa; Fri flash PMI Comp fcst 46.6 after 46.5, MfG fcst 46.6
after 46.2 and Services fcst 47 after 46.7; Thu EZ CP
GE: Tue ZEW Sentiment fcst 6 after 5.4,
Sentiment fcst -11.5 from -15.7, Wholesale PX last -0.6% MoM; Wed 12 CPI fcst
unch +2.%; Fri flash PMI MfG fcst 47.3 after 46.8 and Services fcst 50.0 after
49.7
FR: Wed 12 CPI fcst +1.8% after 2.1%, Fri
flash PMI MfG fcst 44.9 after 44.5 and Services fcst 46 after 45.8
Italy: Thu CPI fcst unch +2.6%; Fri
Government Debt last EUR 1995bn
Spain: Wed Housing transactions; Thu CPI
fcst +3% unch, Fri 14 Q3 House Prices last -3.3% QoQ/-14.1% YoY & Labour
Costs
US: Mon nothing; Tue Small Biz Optimism
last 93.1, Wholesale Inventories fcst +0.4% after 1.1; Wed FOMC; Thu Retail
Sales fcst +0.3% after -0.3%, PPI, Claims; Fri CPI, PMI last 52.4, Industrial
Production fcst +0.2% after -0.4%, Capacity Utilization.
Click
link under title or below for today’s musical support:
After
Bunga Bunga, let’s have a down to earth Bingo Bongo.
Uooo!
Uo! Uo! Uo!
Ua
ua eh eh ih ih oh oh uh uh
Oh
oh oh ua ih ih ih ua ah ah eh eh ih ih
Oh oh uh uh eh eh
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