Archive - Jun 2010 - Story

Goldman's Hatzius, whose +100,000 NFP revision to 600,000 yesterday, officially means he has lost the magic touch, offers his take on the NFP disaster. Ever the optimist, he still manages to find a silver lining. Alas, the market doesn't care, and instead is holding its breath to the joint Obama-Biden teleprompter conference praising the -215k adjusted NFP number.

Hilarious. Any time reality kicks in, the bankers (in this case Unicredit, whose CDS looks so fingerlicking good here) have no other recourse than to beg the money printing acolytes of Keynesianism to push things back to the fake trendline of the credit-driven expansion of the past 30 years. We wish them well. Alas, if the CHF is any indication, it is now too late.

So much for that 700,000 expectation. At 431k, less 411k census, and 31k from temporary help services, it sure doesn't look good even without the 215k birth-death adjustment which only conspiracy theorists look at according to Mr. Liesman. 431k minus 411k minus 31k minus 215k = -226k. Nuf said. In other news, those unemployed longer than 27 weeks hits a new record at 46%. Nothing conspiratorial about that number.

Gold was weaker yesterday, as markets favored equities over safe havens (with BP as a notable exception).

The market opened down around $5.00 yesterday and traded sideways for most of the morning. Then around 11:00 AM EDT, a quick selloff occurred taking the August contract from a high during that period of 1219.60 to a low of 1202.40. The selling stopped and futures stabilized in the1208 area, but we feel the damage was done. Hot money and speculative longs are losing patience or new shorts are punting in expectations of bearish info this morning. With the employment numbers due out at 8:30, Nervous Nellies will square books everywhere. We might add that this is about the time that the stock market began in its own sell-off. Gold and equities are moving in lockstep approaching the NFP.

All trading in shares of OTP Bank, Hungary's largest commercial bank, has been halted on the Budapest stock exchange after a plunge greater than 10%. Nothing to see here, go back to reading Goldman's spin on things, and why everything all of this really should be priced in already.

Goldman Sachs: "Nothing is f*$&ed here dude, those CDS traders are just a bunch of f*$&ing amateurs"

To all those who listened to Hugh Hendry's recommendation to panic a week ago, congratulations- you are well ahead of the market today. Hungary CDS is now offerless as investors are shocked, shocked, that the country (and continent) is actually really bankrupt, as opposed to just make believe. IMF's comments yesterday that it does not have the funds to rescue all of Europe are not helping. Hungary CDS is now essentially bidless last seen 120 bps wider, around 430/460 with the bid/ask spread at 30bps, and only dealers daring to take on any risk exposure as the risk off brigade has kicked the optimists out of the building. The one thing up today so far? Gold. NFP better be north of 100 million or else the stick save today will be a tad problematic.

• ADP reported 55,000 gain in private sector jobs and a fall in weekly jobless claims in US.
• Asian stocks fall led by commodities on fears China’s plans will curb growth will lower demand.
• China shares flat on worries Europe debt woes might hurt exports, end week down by 3.8 percent.
• Dollar trades near four-year high against Euro; Won falls on war concern.
• EU threatens Suez Environnement with fine for interfering with antitrust probe.
• Eurozone Q1 economic growth confirmed at 0.2 percent despite big drop in debt-laden Greece.
• Hungary has solvency issues.

Austria, the country most exposed to weakness in Central and Eastern Europe, is back on the radar. After having avoided skeptical investor scrutiny even as the bulk of Europe was collapsing all around it, the country is today's top CDS widener, yet still stunningly trades inside of France and Belgium. Look for this spread to blow out over the next week. Then again, the biggest CDS wideners are precisely the countries formerly seen safe: Austria, France, Germany and Belgium are all the top movers in CDS. So much for the whole North vs South division in Europe.

Another horrendous day shaping up for Europe. Spanish Bund spreads have surged to all time highs just south of 200 bps, Hungary confirms that it was not exaggerating comments about chances of (not) avoiding Greek situation, pushing its CDS even wider, the EURCHF has dropped to under 1.40 and the SNB has not intervened yet, while the EURUSD is down to 4 year lows below 1.21. The nail in the euro coffin is a report by Reuters that a growing number of Chinese exporters turn down euro payment, flatly refuting anything SAFE may be saying officially.

SocGen is plunging after Reuters has reported rumors about concerns of a massive loss in the firm's derivative division. Deja vu? "Societe Generale, which declined to comment on market rumour, fell 6.3 percent. BBVA and Credit Agricole fell 5 and 3.8 percent respectively."

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 04/06/10

Those observing the emperor's lack of clothing are multiplying. Earlier today, someone opened their mouth, and remarked on the blatantly obvious. Next thing you know Hungarian CDS was 30% wider, Romanian bond auctions were failing, the euro was tumbling, the PPT was scrambling, US markets closed green with nobody trading, etc. Yet the "letting the genie out of the bottle" award of the day has to go to the head of IMF's policy-steering committee, Youssef Boutros-Ghali who said that the IMF is essentially insolvent in its current form of being the go to backstop for a European bailout. "If we are going to start including funds made available to
Europe, then the IMF is not properly resourced," Youssef
Boutros-Ghali told Reuters, adding that IMF members were
talking of doubling the amount of SDRs. The means the IMF is $318 billion short of solvency. And what is the IMF long? Why gold...3,005 tonnes worth.

In a speech before the SW Graduate School of Banking, Dallas Fed's Richard Fisher comes out swinging, blasting his boss Ben Bernanke and his policy of globalized moral hazard: "Let me make my sentiments clear: It is my view that, by propping up deeply troubled big banks, authorities have eroded market discipline in the financial system. It is not difficult to see where this dynamic leads—to more pronounced financial cycles and repeated crises." And just in case listeners missed the point, he followed up: "Just this morning, the Washington Post summarized the impasse that inevitably blocks treatment of the TBTF pathology. In an article on preparation for this weekend’s Group of 20 talks on bank reform, it was noted that “some” participants “remain hesitant to lean too hard on banks they consider vital to their national economies.” This hesitancy only perpetuates the problem: The longer authorities delay the process, the more engrained behemoth financial institutions become; the more engrained they become, the less extricable they are. And so the debilitating disease of TBTF spreads. What appears “vital” becomes “viral” and grows ever more threatening to financial stability and economic stability."