One Minute Macro Update - The Long Overdue Peripheral Meltdown Resumes

Tyler Durden's picture

Periphery Yields: Moving On Up

U.S.: Markets on the rebound this morning  as oil markets calmed on U.S. President Barack Obama and U.K. PM David Cameron’s call for Qaddafi to step down to end the civilian violence. Today’s release of mortgage applications saw a growth of 15.5% last week, coming off of a 6.5% decrease prior.

Europe: Two top ECB officials indicated yesterday that interest rate increases might come sooner than ECB Trichet alluded to last week. Given Europe’s slow economic recovery, opinions are mixed on the matter. Recession-predicting economist Nouriel Roubini told reporters yesterday that if oil reaches $140/barrel, a level seen in the summer of 2008, the rate action will cause many advanced economies to slip into double-dip recession. Recent turmoil in the Middle East has sent oil prices nearing $120/barrel. Greek, Spanish, and Portuguese yields rose again yesterday as Friday’s EU summit on a new debt crisis solution draws closer. Portugal sold €1.0B in 2Y bonds at 5.993% v 4.086% prior with b/c 1.6x v 1.9x prior. The SOVXWE widened out again to 183bp from 177bp a week ago with Spain underperforming as it is most vulnerable to rate hikes. We feel that the longer the periphery/core support process drags out, the more rating agencies will be forced to look at interest rate burdens for periphery countries as being normal moving forward. German industrial production rose 1.8% MoM v 1.7%E. Greek unemployment for December moved up to 14.8% v 14.5%E and 13.9% prior. U.K.’s visible trade balance for January strengthened to -£7.1B v -£8.5B E, its smallest deficit since April of last year. The figures show an improvement over December’s -£9.7B even after considering weather’s impact on exports that month.

Asia: Vietnam’s central bank hiked a key  interest rate up to 12 percent for its third increase in three weeks in a continuing effort to tighten a growing deficit and get a hold on lending. China will report its trade balance tomorrow with market estimates at $4.9B v $6.5B prior. A smaller surplus would lighten criticism on the country that the Yuan is undervalued to maintain a competitive edge in export markets. Today will also see the release of Japanese 4Q GDP at -0.3% QoQ v -0.3% prior as well as Australia’s employment rate, estimated to remain unchanged at 5.0% for February.

From Brian Yelvington at Knight Capital

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hugovanderbubble's picture


the mega default of Europe is coming

End the Euro Farce

Zero Debt's picture

First the ECB makes emergency loans. Then they raise rates. It's simply good banking business sense.

squexx's picture

The tap dance goes on.....

Oh regional Indian's picture

Teh elite playbook is exposed with one simple line across a map.

Gepolitics is it, finance is second fidddle, a dying entity(in it's current form anyways).


Robslob's picture

The Devil may care...

Ferg .'s picture

Looking at EUR/USD you'd hardly think that periphery spreads are widening once again . I'd attribute recent weakness to natural corrective forces at a major resistance level rather than any sort of sell off based on rising yields . Nothing impulsive about the decline . I'm still struggling to comprehend the Euro strength . Speculators seem to have big expectations for the ECB over the coming months which in my opinion are are far too over blown . Rate hikes combined with surging crude prices would really hurt Ireland , Greece , Portugal and , most importantly , Spain .

pazmaker's picture

and now eur/usd bouncing back up over 1.39 after sliding to 1.385.  It hit key support and is now moving higher.

Saxxon's picture

+1 Ferg.  Mr. Trichet is jawboning.

Ferg .'s picture

I think we'll still see some weakness over the coming weeks in EUR/USD pazmaker . The COT shows speculators are hugely Euro bullish , the most since '08 in fact . Nice contrarian play in my view . I think we head lower , perhaps to the 1.3750 area . Then the ECB frontrunners will pour into the market in expectation of a rate hike at the April meeting .

Saxxon , Mr.Trichet does indeed like to jawbone . Whenever things start to look shaky the cheerleading and talk of " inflation concerns " from himself and other ECB/EU officials begins . The exasperating thing about it though is that it works . The Euro nearly always gets a boost .

Thalamus's picture

If banks raised interest rates, increasing their cost of money; they would be forced to lend more to compensate for their higher costs.  This would stimulate the economy by increasing debt held by the little people.  

falak pema's picture

Little people with deep pockets in Europe; high personal savings. Not so in USA. Big difference as the money war rages on.

ivars's picture

My view, expressed in following simple February 6th DJIA and Oil charts for 2011-2012. USA will have to tighten soon, leading to second recession in q4 2011-q1 2012 and all 2012-2013. Except, oil will not go down, but up, because of continuing supply disruptions due to widening political instability in all ( except Norway) oil exporter countries. The inflation will be not there, so other commodities may well take a pause. But NOT oil. Recession in the USA starting in q1 2012 (and elsewhere) will only make a small dip in oil prices ( down to 2012 April Brent 135-150 USD/bbl).

Just two charts, clear picture. If there is correlation between DJIA change and GDP growth, the coming USA recession in q1 2012 and beyond will be minus 2%-4% quarter on quarter annually.

99er's picture


A possible IH&S on the VIX (with a target of 28.82) may cause prices on /NQ to fall towards their tart of 2254.

ivars's picture

Just when the time is to start getting short, people here in many posts are getting hysterically nihilistic about events that should tell them endgame has started, also for stock market.

Which is one of signs that its true endgame. It starts when no one even in ZH anymore believes it will.

HedgeFundLIVE's picture

Take your money off the table; the risk reward is significantly in the hands of the bears. Expectations for wednesday's mkt action:

HedgeFundLIVE's picture

I have the biggest overnight short position I have had in nearly a month:

buzzsaw99's picture



an[sic] phd in the art of bullshit.

UninterestedObserver's picture

Don't they mean double dip depression?

Dokemion's picture

There is an interesting debate in the blogosphere exploring the reasons for the persistent high unemployment rates in the US and elsewhere. Conservatives lay the blame on the structural skills mismatch and argue that this cannot be resolved through any stimulus spending measures. Liberals claim that the massive slump in aggregate demand from the boom, means that there are massive idling resources which can be brought to work with an appropriately structured stimulus program.