Across the Curve
As Greek discussions overnight revealed a spat between Europe and the IMF, and given yet another closing slump in the US, Risk started on a weak footing with Risk nearing Friday lows, before being ramped up by rumours, showered again and finally supported by the US opening in negative, albeit tame manner, before moving into positive territory and taking everything along. Given the noon despair, the afternoon relief seems…exuberant. Especially as the US still lead the way.
"That's The Way" (Bunds 1,34% unch; Spain 5,83% -5; Stoxx 2494% +0,8%; EUR 1,272 +1)
Rather quiet. Verdict still out, whether we’ll get a real rebound or whether the last days were already the dead cat bounce, before heading lower. Periphery on the soft side, but with restricted own dynamics and trailing general Risk sentiment. Waiting. For the US to show the way. Or something to happen.
"Show Me The Way" (Bunds 1,34% unch; Spain 5,88% +7; Stoxx 2473% -0,3%; EUR 1,271 unch)
European equities have made tentative progress this morning, led by the technology and basic materials sectors. The European morning was relatively peaceful until a flurry of activity on the back of European sources commenting that Spain are unlikely to seek ESM aid until the end of the year, and the ECB are not in a rush to commence bond-buying using their OMT facility. The delay of expectations of purchases has taken its toll on the Spanish debt markets which, despite completing their 2012 issuance smoothly today, show signs of strain as the 10yr yield breaches 5.81%, and the yield spread approaches 450bps against the German benchmark – the level at which LCH begin to review margin requirements. The pain in Spain has also impacted the EUR currency, with the major EUR/USD pair printing a two-month low of 1.2720 this morning.
On this lonely blustery day, with US equity markets closed, long-only managers around the US can go peacefully back to sleep as 'Kevin' has got our back. S&P futures (ES) managed a glorious ramp into the 915ET close to confirm a close above the vertically challenged 1400 level. Volume, as one would expect, is dismal but the 6500 contracts that ran thru in the last 2 minutes makes perfect sense (to someone we are sure). The equity futures market was on its own in this rampapalooza, as Treasuries slid to the lowest yields in two weeks, USD strengthened, and commodities dropped - all leaving ES significantly divergent from CONTEXT (broad risk-assets). Nothing but another episode of illegally Banging the Close (but don't hold your breath for the regulators to prosecute anyone, least of all the Liberty 33 residents) with your friendly New York Fed (and Citadel). Gold is higher - even with the USD up 0.25%.
If it wasn’t because the government sponsorship doping Q3 US GDP, we wouldn’t have much on the bright side.
European equities still desperate to shoot up. Feels like too many fickle shorts and too many uncomfortable longs at the same time.
Markets uneasy after round-tripping back to OMT / QE unleash levels and no follow-up stimuli to be seen.
Puh… Why don’t we just wait for Apple? They might pitch a maxi iPhone 6? Or so…
Otherwise, rather Bad Karma day.
Flat start, bullish morning, refreshing afternoon. Nothing concrete or fundamental, so it’s a spiritual thing.
Uuuhh. Yesterday a heart attack and today Lights Out? Then again, markets went up seamlessly with no trigger and can thus slide the same way.
AAPL will need to come up with a helluva surprise mini iPad that does the cooking and bring the kids to school to turn around things overnight.
Spain situation still by far not settled enough to last without some real interventions / decisions.
European equity resilience seems surprising, given the otherwise gloomier mood. No news still played out as being good news and even catch-up to US levels seems a doubtful explanation.
Stronger Periphery close will be the usual opportunity for politicians to rant about the lack of clout of rating agencies.
Good Jump in Risk appetite. Question is how far. Lack of absence of negative news, or better, markets simply ignoring the latter, doesn’t make for a convincing bullish rebound.
I’d say: We won’t get fooled again! European Bull trap.
Uninspiring day. Light ROff, but nothing major.
In absence of hard data, subject to rumours and sentiment.
So after 2 hell of positive weeks with fairy dust sprinkled by the CBU (Central Banks United), things seem a little out of breath here.
Post-Central Bank intervention depression, so to speak, as the question on everyone’s mind is “What’s next?
Add to that soured geopolitics that stirred spirits in Asia, MENA and to some extend in regional Spain.
Central Banks United have the upper hand these days. So don’t mess with them…
At least not this week…
There is still some compression margin, but where to put the credit spread, real or “perceived”, from a (real) default possibility point of view or even from the shunned convertibility point of view?
No exactly fireworks, but anything that isn’t totally bad these days is good to have.
Good news, but then not so good news?! So, no QE, after all?