Archive - Sep 12, 2011

Can the NYSE Boerse merger close quicker so some of that vaunted German engineering can finally come to the NYSE Liffe and it stops breaking every 5 minutes when the market drops?

There has been a sharp increase in risk aversion with the euro and stocks internationally falling sharply due to concerns about the coming Greek default and the real risk of contagion in the Eurozone. The euro got off to a rocky start in Asia, falling to fresh six-month lows against the dollar and a 10 year low on the yen as downside momentum picked up after several key technical levels gave way recently. Gold could see weakness today due to dollar strength and the possibility of margin calls for leveraged players on the COMEX.  However, bargain hunting bullion buyers are present at these price levels and gold is likely to be supported above $1,800/oz. While dollar strength would normally result in gold weakness it is very possible that both the dollar and gold could rise together in the short term. This would result in gold making sharper gains in pounds, Swiss francs, euros and other fiat currencies. France’s largest banks by market value, BNP Paribas SA, Societe Generale SA and Credit Agricole SA, may have their credit ratings cut by Moody’s Investors Service as soon as this week because of their Greek holdings.  Officials in Merkel’s government are debating how to shore up German banks in the event that Greece defaults. Merkel is due to hold talks on the debt crisis with European Commission President Jose Manuel Barroso today. The risk of contagion in the Eurozone sovereign, banking and entire financial system is very real and will result in continuing safe haven demand.

As we speculated on Friday, Europe has opened, and it is ugly. In fact, Europe has never been closer to a bank and market holiday than it is right now. Why? Let's go down the list...

How good is ECB at buying Eurozone Bonds? First couple of days, they are in the money, but.....

All you need to read.

After a brief push back above Friday's lows, ES is back down to the early overnight lows (-17) just in time for the opening of Europe. Early runs on ITRX Main show +10bps at 198/200bps, XOver breaking 800bps (+35bps), and SovX +23bps to 333bps - not pretty (and worse than simply catch up to late Friday's demise). Financials continue to bear the brunt but non-financials are getting dragged out now more and more.