11 Dec 2012 – “ (Ain’t
That) Good News ” (Sam Cooke, 1964)
Markets recovering quite nicely from the
Italian shock. Add some better outlook figures and we’re all friends again. The
Spanish bill auction was less punishing than could have been feared. US opening
stronger. Everything else is all good again. Greek bonds stellar.
"(Ain't That) Good News" (Bunds
1,32% +2; Spain 5,45% -9; Stoxx 2623 +1,0%; EUR 1,299 +60)
---
Not much to chew on overnight. The US ended
slightly positive in reduced volume and volatility with closing levels a shade
below European COB. Awaiting Fiscal Cliff clues or maybe some guidance from the
FED.
Asia mixed, but close to home with China down 0.5%
after the last days run upwards, Japan a touch in the red, the rest sluggishly
positive.
Some press reports fretting about Monti
eventually being lined up on an centrist and “responsible” platform. Like
stated yesterday, we’ll all suddenly turn political analysts, specialising in
the colourful Italian scene, but will thus remain essentially blind for a
while.
No noteworthy macro data to start the day
with the exception of German Wholesale Prices ticking lower to -0.7% from -0.6%
MoM, +3.2% after 4.6% YoY.
Morning quotes 30 minutes into the session
showing markets generally flat, a slight axe into EGBs and Italian bonds still
on the heavier side.
Bunds 1.29% (-1) / UST 1.62% (flat on
Friday’s levels).
Italian 2s wider by 7 to hit 2.25% and 10s
equally soft to hit 4.87%. Spain
is holding a little better, just one symbolic basis point wider, in order to
mark Periphery softness (ahead of the 12 & 18m bills sale).
Equities flat to a tick or two better with Italy again 0.7%, balanced out by Spain 0.5%
firmer. Credit a tick better.
EUR back to mid-1.29s. Commodities mixed to
a little softer.
Mood swinging back to a brighter one in the
course of the morning with especially Italy getting some support and turning
flat from the initial softness, and everyone getting its monies with Spain
issuing (more than the targeted EUR 3.5bn) EUR 3.9bn in 12 and 18m bills at
2.56% and 2.78% (from 2.80% and 3.03% one month ago), while Greece hit bids for
slightly over EUR 2.7bn in 4-week bills at 3.99% and EUR 1.625bn 6m at 4.38%
(from 3.95% and 4.41% one month ago). Belgium sold EUR 200m 3m at -0.032%
and especially EUR 1bn 12m at -0.0039%, finally having, too, a shot at testing
the sweet taste of negative 1-year yields. France is now done with bills for
the year and will be back in 2013.
Austria
sold EUR 550m 2019 at 1.021% and the same amount in 2022s at 1.706% (from
yesterday’s closing levels at 1.205% and 1.700%), both, of course, record
auction lows.
Italy will sell EUR 6.5bn in 12m bills
tomorrow (last 1.76%) et courageously sticks to its plans to sell a new 3 YRS
benchmark on Thursday with EUR 3.5bn now slated for a 2.750% 01 Dec 2015 (ISIN IT0004880990)
(The last 3 YRS auction was at 2.64% for Jul 2015s mid Nov) and up to 750m to
be added to the 4.500% Mar 2026 (COB 4.965%). And if the Spaniards go for the
2040 on Thursday…
Spain going for a mere EUR 2bn in 3 and
off-the-run 5 YRS, next to increasing the 4.90% Jul 2040 (6.075% at COB). Announced as well it would provide up to EUR 23bn for the regions. Will need to see the size of the tab for 2013.
New Issues still sporadic but with larger
sizes than yesterday with French retailer Carrefour raising EUR 1bn in 5 YRS at
MS +120 and AT&T going for EUR 1bn 20 YRS at MS +140 (after EUR 1bn 8 YRS
at MS+60 10 days ago).
Good German ZEW numbers, as sole important
European data set of the day, with Current Sentiment slightly under forecast at
5.7 (fcst 6 after 5.4), but with the Economic Sentiment surging to 6.9 (fcst
-11.5 after -15.7) and the EZ ZEW Economic Sentiment rising to 7.6 from -2.6.
So late-morning mood back into Risk On after yesterday’s wobbles.
No need to delve on the general support for
Monti – stemming from outside Italy.
Everyone’s darling.
Midday picture showing a much improved view
of potential Periphery stress with Italy
finally tightening in 15bp from the morning wides and Spain tagging
along.
EGBs mildly softer, after this morning’s
mildly stronger start, but then, they hadn’t had a hugely visceral reaction of the last
days either.
Bunds 1,32% (+2), OBLs 0,31% (+1), BKOs
-0,070% (+0,8). UST at 1,63% (+1).
Spanish 2s 2,98% (-7), 10s 5,48% (-6). 2-10
YRS spread 250bp (+1).
Italian 2s 2,13% (-5), 10s 4,75% (-6). 2-10
YRS spread 262bp (-1).
Equities crawling back higher, up 0.50%.
Credit recovering with especially Financials 4/2.5% tighter.
EUR crawling higher. Commodities about
unchanged from morning levels.
Greek bonds going for a final stampede on
the closing of the buy-back with 2023s now at 43.50 (13.28% -30bp) and 2042s at
33.0 (11.15% -34bp) from yesterday’s closing estimates at 42.50 (13.58%) and
31.75 (11.49%).
So both ends of the GGB curve are now well
over the high end of the buy-back proposals of 40.1 and 32.2.
US
Small Business optimism on the softer side at 87.5 (fcst 92.5 after 93.1), but
with the markets awaiting Inventory numbers as main number of the day (fcst
+0.4% after 1.1%) after markets open.
US equities gapping up over 0.5% at open,
shoving European Risk as much higher, too. Wholesale Inventories rising 0.6%
(fcst +0.4% after +1.1%), although Sales were down -0.3% (ex gas). Some stuff might
be piling up, here… More secondary data sets on Economic Optimism down to 45.1,
missing a 50 forecast after 48.6 (Hmmm?!
Another sentiment miss?) and JOLT Jobs up to 3675 (fcst 3600 after rev.
3547). Who cares? S&P crawling back to election levels 2 months ago and
EStoxx taking out new 2012 highs. Ain’t
that Good News???
Pretty good sync in global equities with all
indices across the board trading about +0.75% from yesterday’s European close by
late afternoon. NASDAQ a quarter better with Apple up 3%. Italy and Spain
outperforming, too. EUR happily back to 1.30.
European Risk closing taking out its top of the
year (up 1%, down 0.2% HOD) with Credit strong again (about 4% tighter).
EGBs trading sideways in unconvinced
manner, be it to the tight side or softer. Curves more or less unchanged.
Bunds closed at 1,32% (+2), OBLs at 0,31%
(+1) and BKOs -0,070% (+0,8). UST at 1,65% (+3) COB, ahead of 3 days of auction
supply.
Spanish 2s at 2,95% (-10), 10s at 5,45% (-9).
2-10 YRS spread 250bp (+1).
Italian 2s at 2,08% (-10), 10s at 4,72%
(-9). 2-10 YRS spread 263bp (+0).
Greek bonds closing at their highs on the
closing of the buy-back with 2023s now at 43.50 (13.28% -30bp), unchanged from
noon, and 2042s at 34.0 (10.90% -59bp) from yesterday’s closing estimates at 42.50
(13.58%) and 31.75 (11.49%). Ain’t that
Good News?
Note that Commodities didn’t join the Risk
On party again with Oil split, Gold a touch softer, as is Copper.
Take-away: Markets recovering quite nicely from
the Italian shock. Add some better outlook figures and we’re all friends again.
The Spanish bill auction was less punishing than could have been feared. US
opening stronger. Everything else is all good again. Greek bonds stellar.
Outlook: Same. Sideways upwards, subject to
Fiscal Cliff discussions and Italian bunga
interventions. Spain to hurt, if Italy weakens further. Amazingly quiet Italian
front, but, then again, the campaign hasn’t started yet. Careful!
We felt yesterday that EGBs were looking
tight and rather unwilling to shed much more yield, unless real panic spreads,
which was confirmed today. They’re not getting much softer either, on the other
hand. Equities amazingly aloof. Everything good. Ain’t that Good News?
Italian 12m bills tomorrow. EZ Industrial
Production fcst flat MoM after -2.5% / -2.4% after -2.3% YoY wda. FED
European
50 & 100d averages: EStoxx 2519/2484, DAX 7289/7167, CAC 3466/3446, MIB
15578/15276, IBEX 7816/7607.
US
50, 100 & 200d averages: INDU 13142/13160/13000, S&P 1417/1413/1386,
NASDAQ 3004/3025/2988 with AAPL at 597/622/601.
EUR: 50d 1.292, 100d 1.276 & 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%).
Next AVFMS will be Thursday.
Closing
levels:
10 YRS Yields: Germany 1,32% (+2);
Luxembourg 1,39% (unch); Netherlands 1,53% (unch); Finland 1,56% (unch); EU
1,58% (unch); Swaps 1,58% (unch), Austria 1,71% (+1); EIB 1,75% (unch); EFSF
1,86% (-1); France 1,96% (+1); Belgium 2,12% (+1); Italy 4,72% (-9); Spain
5,45% (-9).
10 YRS Spreads: Luxembourg 7bp (-2);
Netherlands 21bp (-2); Finland 24bp (-2); EU 26bp (-2); Swaps 26bp (-2);
Austria 39bp (-1); EIB 43bp (-2); EFSF 54bp (-3); France 64bp (-1); Belgium
80bp (-1); Italy 340bp (-11); Spain 413bp (-11).
EUR swap curve 2-5 YRS 44bp (unch); 5-10
YRS 82bp (unch) 10-30 YRS 67bp (-1,0).
2 YRS German BKOs closed -0,070% (+0,8) and
5 YRS OBLs 0,31% (+1).
Main -5 to 115 (-4,2% tighter); Financials
-6 to 152 (-3,8% tighter); Cross -19 to 463 (-3,9% tighter).
Stoxx Futures at 2623 / +1,0% (from 2598)
with S&P minis at 1431 (+0,8% from 1420, at European close).
VIX index at 15,6 after 16,5 yesterday same
time.
Oil 85,8/107,9 (WTI/Brent) from 86,4/107,0
(-0,7%/+0,8%). Gold at 1707 after 1713 (-0,4%). Copper at 368 from 370 (-0,5%).
CRB at EU COB 293,0 from 295,0 (-0,7%).
Oh? BDIY crashed 66 ticks or 3.9% to 900
today. The latest dip from the post-Summer high of 1109 in Oct had been halted
at 916, before that we slipped from 1162 in July to 661 mid-September.
Upcoming
Chinese New Year (10 Feb 2013)…
EUR 1,299 from 1,293
Greek bonds closing at their highs on the
closing of the buy-back with 2023s now at 43.50 (13.28% -30bp), unchanged from
noon, and 2042s at 34.0 (10.90% -59bp) from yesterday’s closing estimates at
42.50 (13.58%) and 31.75 (11.49%).
All levels COB 17:30 CET
Fast-forward
Macro and Events:
Flash PMI releases on Fri 14 everywhere.
HSBC China on Thursday.
For the US, FOMC tomorrow & auction
supply. Retail Sales and IP next Friday.
Spain and Italian bonds on Thursday.
EC: Wed IP fcst flat 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: 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: 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:
2005
re-recorded together with Jeff Beck & Les Paul. Bow to the Master!
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