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One Minute Macro Update: Risk Off
U.S.: Markets down this morning as turmoil in Libya heightens. Treasuries remained unchanged and LIBOR-OIS fell to 16.3bp from 16.75bp last Friday v 12bp at the start of the year. Look for today’s release of consumer confidence and Thursday’s release of durable goods to put the recent stock market gains in the context of the economic recovery.
Europe: Merkel’s party, the CDU, lost in an election in the state of Hamburg on Sunday, the first of seven state elections scheduled this year. This loss weakens Merkel’s position in the upcoming EU summit to create a permanent rescue plan. European elections such as those in Germany are likely to serve as catalysts in the ongoing financial crisis. Spain sold €1.86bn in 3M bills at 1.01% v 0.980% prior and b/c at 3.3x v 5.48x and €1.01bn in 6M bills at 1.588% v 1.801 prior and b/c at 5.5x v 5.11x. The ECB admitted that the increase in overnight lending last week at €14.1bn v €14.2bn prior was due to events relating to Ireland and affirmed that it was only a short-term event. EURIBOR-OIS is down to 26.45bp from the 40.9bp base at the beginning of 2011. SOVXWE widened, breaking back out to the low/mid 180s. We believe the hard-line stances in core and periphery countries plus the potential for headlines through late February and into March should continue to pressure spreads.
Asia: Japan suffered a rating outlook downgrade from “stable” to “negative” due to rising debt and the low likelihood of policy action reaching deficit reduction targets. The country’s rating remains at Aa2. Japan’s three largest banks also suffered rating outlook downgrades because of their interconnectedness with the sovereign. An Australian survey found that expectations for a housing market recovery in the country are dull, making a wider economic recovery more difficult.
From Knight Capital's Brian Yelvington
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consumer confidence number
i love that euphamism
better change it into CBC : Consumer Body Count
Another wild ride in EUR/USD , which was tanking until some , you guessed it , inflation concern comments from another ECB official , Mersch this time , led to a sharp turn that has sent the EUR/USD green for the day ( same scenario last week after the Smaghi comments).Wow , who would have thought it was that easy to keep a currency buoyant .
Perhaps this was the agreement that was settled with Japan and China ? Keep buying those periphery / EFSF bonds and we'll ensure that you no longer have to worry about the euro heading below 1.3500 and far beyond . No need to prop it up during the depths of an illiquid Asian session any longer , we'll take the mantle from here on in .
The history of currency interventions is that they work ... for a few days .
Unfortunately that's all it takes to ruin a carefully planned trade .
Well we already know the Consumer Confidence number will be "greater than expected". In fact I would wager that the PPT is pulging in their numbers to see what the algos will like best.
Ultimately the cash currency demanded by middle east ex- dictators, russian mafia, various kidnappers and other riff raff - is what detrmines where these currencies will wind up. That is called "market forces" -
As the German voters just told Merkel:
FUCK YOU EUROPE!! NO MORE FREE CASH FOR YOU!! BRING BACK DIE DEUTCHE MARK!
ENDGAME BITCHEZ!
ES
Should be fun!
http://www.zerohedge.com/forum/99er-charts-0
our own macro thesis for tuesday's market:
http://www.hedgefundlive.com/blog/tuesday-market-expectations-from-jeremy-frommer-7-reasons-the-stock-market-is-suffering-from-narcissistic-personality-disorder