Quite a data dump took place at 10 am. Here are the highlights:
- China’s Biggest Banks Are Squeezed for Capital (NYT)
- Greeks detect hypocrisy as Dutch coalition stumbles (Reuters)
- Hollande Blames Europe’s Austerity Plan for Le Pen’s Rise (Bloomberg)
- In a Change, Mexico Reins In Its Oil Monopoly (NYT)
- China Tire Demand Slows as Economy Decelerates, Bridgestone Says (Bloomberg)
- Social Security’s financial forecast gets darker; Medicare’s outlook unchanged (WaPo)
- Fed’s 17 Rate Forecasts May Confuse More Than Clarify (Bloomberg)
- Senate to vote on array of Postal Service overhaul proposals (WaPo)
- Weidmann Says Bundesbank Is Preserving Euro Stability (Bloomberg)
It' quiet out there... Too quiet, as everyone is awaiting the most important earning number of the quarter - that of Apple. Everything else is secondary. Here is how the secondary data is driving the market so far in the trading session.
European stocks are trading lower as North America enters the market with participants coming to terms with the political events of the weekend. The collapse of the Dutch government has clouded the future for fiscal harmonisation in the Eurozone and the outperformance of the far-right in the French Presidential elections has highlighted the discontent of the populous with mainstream politics. As such, all European bourses are trading significantly lower, with the Bund seen trading higher by around 70 ticks. European government bond yield spreads against the German 10-yr reflect the caution, with the Dutch/German spread widening by over 10BPS and the Spanish yield holding above 6% for most of the session.
- A Forecast of What the Fed Will Do: Stand Pat (Hilsenrath) - they finally realized that they have to leak the opposite...
- Draghi's ECB Rejects Geithner-IMF Push for More Crisis-Fighting (Bloomberg)
- Wal-Mart's Mexico probe could lead to departures at the top (Reuters)
- The Sadly Unpalatable Solution for the Eurozone (FT)
- US Regulators Look to Ease Swaps Rules (FT)
- Yuan, Interest Rate Reform to be Gradual: China Central Bank Chief (Reuters)
- Run, Don't Walk (Hussman)
- Hollande Steals Poll March on Sarkozy (FT)
If last week was Europe's days of hope, even as the continent was again breaking, predicated by the utterly ridiculous such as a successful Bill auction, a weak Spanish Bond issue, somehow spun by the propaganda crew as good despite pricing at an utterly unsustainable interest rate, and various German confidence indicators which soared to multi-year highs, today is the bitter hangover. Where to start...
Continuing today's disappointing data releases, we now get the Philly Fed, Existing home sales (aka the NAR's monthly advertising update), and Eurozone confidence. Sure enough, all missed, since we are now in NEW QE prep mode.
- Philly Fed: 8.5, missed expectations of 12.0, and lower than the previous print of 12.5 (source)
- New Orders down from 3.3, to 2.7
- Prices Paid spike from 18.7 to 22.5,
- but, just to add confusion to injury following the much weaker claims data, the Employment index rose from 6.8 to 17.9
- Existing home sales, reported by the inherently conflicted NAR, missed, dropping from 4.61MM to 4.48MM, a data set which we caution readers is about 0.0% accurate and valid.
- Total housing inventory at the end of February rose 4.3 percent to 2.43 million existing homes available for sale, which represents a 6.4-month
- The national median existing-home price for all housing types was $156,600 in February, up 0.3 percent from February 2011.
- All-cash sales rose to 33 percent of transactions in February from 31 percent in January; they were 33 percent in February 2011
- Single-family home sales declined 1.0 percent to a seasonally adjusted annual rate of 4.06 million in February from 4.10 million in January
- Finally, Eurozone consumer confidence also missed sliding to -19.8, on expectation of an improvement to -19.0 from -19.1
Judging by the kneejerk reaction lower, the misses were not big enough to send the market soaring.
European markets are seen trading higher as North America comes to market, with some momentum seen following the release of the forecast-beating German ZEW Survey. An economist from the institution commented that downside risks have decreased significantly over the past month, prompting some risk-appetite in Europe during the morning. Participants were also looking towards the Spanish T-Bill auction with particular focus, but it did not confirm the nation’s worst fears as the auction passed with strong bid/covers, selling to the top of the indicative range. Yields, however, did increase over both lines. As such, the Spanish 10-yr yield has fallen below the key 6% mark and remained below that level for most of the session. Peripheral 10-yr spreads against the German Bund are seen tighter throughout the day, amid some market talk early in the session of domestic accounts buying the paper, however this remains unconfirmed.
All you need to read and some more.
The question most asked by clients is why, with all that is going on in Europe, is the currency not much lower as nearly every analysts has a target of between parity and 1.2000? It is a very good question but way back at the start of 2011 I suggested that I felt some accord had been reached by the G20 to hold the EUR stable and this I still believe. The issue is that the EU leadership and indeed all those that trade with the zone, realize that equity markets would be held up by QE and that bond yields could be kept down (wrong) using the same method but the whole house of cards could be brought down if there was a run on the currency and a general loss of confidence in the currency. It would simply be a disaster and to me it is central bank manipulation that is keeping the EUR so ridiculously strong so selling breaks to the downside has seen many karted out on a stretcher and sent to the asylum.