Archive - Dec 15, 2010 - Story

Robots everywhere are panicking as the NYSE has just announced it is experiencing "slowness" in disseminating trades and quotes. In a casino market now built exclusively for frontrunning the slower order flow, this means that millions of computers are suddenly clueless as to who should be scalped. And if they all move to the rickety BATS exchange en masse, a flash crash may be all but inevitable.

The October TIC Data is out (although courtesy of the total and ridiculous redesign of the Treasury's website, is a complete nightmare to navigate). Net foreign purchases of US securities amounted to $54.7 billion, down from a revised $90 billion in September, and even more from $136.3 billion in August. Net foreign purchases, net of adjustments and US purchases of foreign securities, amounted to $7.2 billion, substantially lower than expectations of $51 billion. Digging through the data reveals some interesting trends, namely the purchases of LT Treasurys, while still positive, plummeted from purchases of $78.3 billion and $117 billion in the prior two months. The savings grace is that foreign purchases of Corporate Stocks remained relatively strong, at $16 billion. Looking at China we observe that the country actually sold off Long Term UST (while buying Short Term Bills): this means that the Fed, with its $966 billion in US paper is now untouchable at the top of all holders of US Treasurys.

Perhaps it is time for Eurostat to adjust its Greek economic numbers. According to a back of the envelope analysis, roughly 5% of GDP in 2010 was lost to a string of increasingly more potent general strikes, and another 10% due to downstream effects. A new one is in process currently, which will be particularly crippling as workers in the transportation industry have called for a near week-long shut down of the capital. For those travelling to the city (not sure how as all flights into the city have been cancelled), here is revised operational schedule of various means of transportation: Buses and trolleys will operate from 9 am to 9pm; The metro (all lines) will run from 10am to 6pm; Taxis will not operate between 10am and 2pm. And courtesy of "From The Greek Streets", below is a live update of events from Athens as they transpire in real time.

The two big economic numbers today were a mixed bag: CPI came in below expectations of 0.2%, at 0.1%. Core was in line with expectations of 0.1%, an improvement from the prior 0.0%. Elsewhere, the November Empire Manufacturing index climbed from the abysmal reading of -11.14 (which was largely ignored due to its outlier status), almost exclusively due to a surge in New Orders, which jumped from -24.40 to 2.6. What is troubling is that the Employment index dropped from 9.1 to -3.4, which could be a shift in diffusion indices toward a decline in employment. Then again last month despite a surge in diffusion employment strength, the NFP plunged. So in this version of bizarro world, the worse the employment index, the higher the NFP will likely be. And just as troublingly, priced paid jumped from 22.1 to 28.40: "the future prices paid index was positive and rose sharply, indicating that respondents expected input prices to accelerate." Continuing margin contraction anyone?

• Irish parliament to vote on EU/IMF bailout (Reuters)
• China Consumers Signal Deepest Inflation Concern Since 1999 in PBOC Survey (Bloomberg)
• Japan Confidence Deteriorates for First Time Since Crisis (Bloomberg)
• Japan Cuts Corporation Tax in Growth Bid (FT)
• U.S. at Risk of Rare Earths Supply Disruption (Reuters)
• US SEC's ABS Quandary Still Pending Business (Market News)
• George Soros Op-Ed: Europe should rescue banks before states (FT)
• The countless exemptions, credits and deductions cost the government more than $1 trillion annually in foregone revenue. It's time for an overhaul. (LA Times)
• Germany Stiffens Opposition to Bigger Bailout in ECB Face-Off (Bloomberg)

A summary of all the key events overnight that are shaping market today. Of note, a particularly weak 3M €500 million Bill auction in Portugal which came at 3.403%, up 159 from prior, with a lower bid to cover: 1.9x vs 2.2x before.

After the mortgage applications data we have CPI, a couple of reports on industrial activity, and one on builder sentiment. Also, POMO comes back with a bang.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 15/12/10

EURUSD whoosh. Somehow the fact that Europe is insolvent is once again lost on the markets who need Moody's to remind them. Let's see how the upcoming Spanish auction will fare under these circumstances. From Moody's:"Moody's Investors Service has today placed Spain's Aa1 local and foreign currency government bond ratings on review for possible downgrade. The main triggers for placing the rating on review for possible downgrade are: (1) Spain's vulnerability to funding stress given its high refinancing needs in 2011. This vulnerability has recently been amplified by fragile market confidence. (2) A potential further increase in the public debt ratio should the cost of bank recapitalisation prove to be higher than expected so far, whether to meet higher-than-expected asset impairments or simply to retain the confidence of the wholesale markets. (3) Increased concerns over the ability of the Spanish government to achieve the required sustainable and structural improvement in general government finances given the limits of central government control over the regional governments' finances."