Archive - Jul 3, 2013 - Story

The algos could have a problem getting out of this one. From Mrs.Watanabe (JPY -170pips, NKY -500 points from highs) getting hammered (and the Hang Seng -5%) to European sovereign bond spreads exploding (Portugal +170bps - biggest spike in 2 years to 8 month highs) and financial stocks collapsing (-4%), safe-havens are heavily bid from gold and silver (+3% from lows) to US Treasuries (10Y dropped 8bps) and global equity markets are taking it on the chin. Not pretty...

It appears that all it took for Spain to finally grant Bolivian president Evo Morales a green light to fly in its airspace was a thorough Austrian check of its cargo hold, a la Millennium Falcon, to make sure it does not hide Barack Obama's public enemy number 1. Sure enough, the plane has left Vienna and at last check was about to fly over Madrid in a few short minutes.

• Portuguese bond yields soar amid political turmoil (FT)
• Portugal Resignation Rocks European Markets (WSJ)
• Portugal, Greece risk reawakening euro zone beast (Reuters)
• Egypt’s military chiefs hold crisis meeting as Mursi snubs ultimatum (Al Arabiya)
• Egypt Crisis Deepens as Mursi Refuses to Step Down (BBG)
• Hidden microphone found in London embassy: Ecuador (AFP)
• Health Law Penalties Delayed (WSJ)
• Rise in mortgage rates cut into homebuyer demand last week (Reuters)
• Bolivia angered by search of president's plane, no sign of Snowden (Reuters)
• Olympus ex-chairman gets suspended sentence (FT)

Presented with little comment aside to note that with all eyes squarely focused on this Friday's payroll data (and today's ADP and claims), it is worth reminiscing of the hope that we felt in 2006 and 2007 when it was "different this time" and the divergence between a plummeting ISM employment index and non-farm-payrolls meant nothing...

And just like that things are going bump in the night once more. First, as previously reported, the $100+ WTI surge continues on fears over how the Egyptian coup will unfold, now that Mursi has a few short hours left until his army-given ultimatum runs out. But it is Europe where things are crashing fast and furious, with the EURUSD tumbling to under 1.2925 overnight and stocks sliding on renewed political risk, with particular underperformance observed over in Portugal, closely followed by its Iberian neighbor Spain, amid concerns that developments in Portugal, where according to some media reports all CDS-PP ministers will resign forcing early elections, will undermine country's ability to continue implementing the agreed bailout measures. As a result, Portuguese bond yields have spiked higher and the 10y bond yield spread are wider by over a whopping 100bps as austerity's "poster child" has rapidly become Europe's forgotten "dunce." The portu-litical crisis has finally arrived.