Archive - Jul 14, 2011 - Story

Italy may not be Greece, but its important to remember that Greece wasn't Greece just 15 months ago. It seems like we have been talking about the problems in Greece for ages, but the reality is the market let them price a big "successful" bond deal in March of last year. While it is important to remember that the Troika has shown great support for sovereign debt, its also important to remember the market got it horribly wrong last year.

• European Leaders Delay Summit Meeting Over Greece (NYT)
• Tensions Escalate as Stakes Grow in Fiscal Clash (NYT)
• China Growth Suggests Tightening Ahead (WSJ)
• Banks, Regulators Still Jostling Over EU Stress Tests (WSJ)
• Obama and lawmakers face fresh doubts on debt deal (Reuters)
• Italy money supply plunge flashes red warning signals (Telegraph)
• ECB: Greek Debt Outcome Depends Mainly On Greek Government (Market News)
• Helaba pulls out of European stress tests (FT)
• India Says All ‘Hostile’ Groups Are Suspects After Mumbai Blasts Kill 17 (Bloomberg)
• Greece PM says second bailout needed urgently (Reuters)

Retail sales, jobless claims, producer prices, and a second day of testimony from the Fed Chairman. Let's see if the market can price in QE3 for the third time in a row on all the same data.

Key highlights from the just released JPM results:

• JPMorgan 2Q adj. EPS $1.27 vs est. $1.21; rev. $26.78b vs est. $24.91b
• CEO Jamie Dimon sees card losses improving next quarter, sees mortgage taking some time to resolve issues, possible we will incur additional costs along the way
• 2Q reserves $29.1b, release of $1.3b vs release of $2.6b in 1Q, coverage ratio 3.83% vs. 4.1% in 1Q
• I-banking: rev. $7.31b, down 11% Q/q, up 16% Y/y
• Fixed inc/equity mkt rev. $5.5b, down 16.7% Q/q, up 19.6% Y/y
• I-banking fees $1.9b, up 37% Y/y
• Hired more than 10,000 employees year-to-date

A snapshot of the European Morning Briefing covering Stocks, Bonds, FX, etc.
Market Recaps to help improve your Trading and Global knowledge

Gold has risen to new record nominal highs at $1,594.45 per ounce and silver has surged another 3% to over $39 per ounce after yesterday’s 6% rise. Today’s London AM Fix gold fix was $1,592.50 £987.54 and €1,119.04 – all of which are new record nominal highs. European stock markets are lower after Asian equity markets were mixed overnight with the Nikkei falling 0.27%. European debt markets are under pressure this morning with Spanish and Italian bond yields rising towards 6% again. Ireland’s 10 year and 2 year yields spiked to new record highs at 14.13% and 20.9% prior to sharp falls which had the hallmarks of sovereign intervention - possibly the ECB or China. The U.S. had its Aaa bond rating placed on review for possible downgrade by Moody’s which cited the “rising possibility” that the debt limit won’t be raised on a timely basis. U.S. treasuries have also been sold this morning. Concerns that QE3 and the printing and electronic creation of hundreds of billions of dollars and Obama’s walkout from debt ceiling negotiations is not helping dollar and bond market jitters and has led to the record dollar gold price.

While it is unclear if the ECB intervened in the second Italian bond auction of the week (we will know better over the weekend when the ECB provides the weekly change in its bond purchasing program), the much anticipated issuance of 5 and 15 year bonds is now in the rear view mirror. As Reuters says, "Italy sold almost 3 billion euros of medium- and long-term government bonds on Thursday in a sale which analysts said went well although the Treasury had to pay the highest premium on record to sell 15-year paper. The gross yield on the 5-year BTP jumped to 4.93 percent, the highest yield in auction since June 2008 and compared with 3.90 percent in the last auction a month ago. The new 15-year benchmark drew bids 1.49 times the amount offered and a gross yield of 5.90 percent, the highest on record. The auctions were seen as a key test of market appetite for the country's debt after it got sucked into the debt crisis, sending its benchmark 10-year yields briefly above 6 percent on Tuesday for the first time since the euro's launch in 1999." The prior 5 and 15 year bonds priced at 3.90% and 5.34% respectively, and 1.28 and 1.33 for the Bid To Cover. Yet with the 15 Year trading at 5.99% just prior to the auction, it does seem that there was a positive surprise. We will bring you any stories of ECB or Chinese intervention as we see them.