Economic Calendar

Renewed European Fears Send CHF Soaring, Force Swiss National Bank To Defend EURCHF 1.20 Floor

And like that, Europe is broken again. Following a spate of negative European data (what else is there), including a miss in German industrial production as well as a miss in UK manufacturing output, all eyes are again on Spain, especially those of the bond vigilantes, who have sold off the sovereign European bond market, sending the Spanish-Bund spread to over 400 bps for the first time since December 2011. The main reason today: a Goldman report saying Spain will unlikely meet its 2012 and 2013 budget targets, as well as JPM Chief Economist David Mackie saying Spanish government "missteps" have raised questions about its credibility, making investors reluctant to purchase Spanish debt. Stress has returned to periphery, if it broadened into bank funding markets more LTROs would be forthcoming; if that “failed to hold yields at an appropriate level” Spain may need assistance from the EFSF/ESM and the IMF. Euro area unlikely to return to stability in sovereigns without some burden sharing; nominal growth likely to stay below borrowing costs, making fiscal targets “all but impossible to achieve”. UBS piles in saying Spanish banking stresses still haven't been addressed. Finally, a big red flag is that market liquidity is once again starting to disappear, and as Peter Tchir points out, Main is now being quoted with 3/4 bps bid/ask spread, all the way up to 1 bps spread. In other words, as we have been warning for weeks, the period of fake LTRO-induced calm is over, and the market is demanding more central planner liquid heroin. The question becomes whether Europe has even more worthless collateral in exchange for which the ECB will continue handing out discount window money in sterilized sheep's clothing. Yet nowhere is the resumption in risk flaring more evident than in the Swiss Franc, where the EURCHF all of a sudden broke through the critical 1.20 SNB floor, which was set back in September 2011, the day gold was trading at its all time high. Said otherwise, everyone is once again scrambling for safety. And since they can't get it in the CHF, it is only a matter of time, before gold resumes its ascent as the paper currency alternative that sent it to its all time highs late last summer.

Selloff Resumes As "Risk Off" Sentiment Refuses To Leave

Yesterday we discussed extensively how the narrative of US decoupling, which has so far trumped everything else, is finally fading, is coming to an abrupt end, and with no other "plotline" to take its place, as China, Europe and corporate profits are all in the dumps, the only option is for more easy money to come soon. However, with crude sticky this will be a problem in an election year. Today, this sentiment has become even more acute as new Greek 2023 bonds have for the first time trade over 20%, with weakness spreading to all the other PIIGS, and talk of yet another LTRO already picking up pace. The question of what if any assets European banks is luckily ignored for now. So as futures turned red once more, here is Bank of America summarizing the bearish market sentiment this morning.

Overnight Sentiment Down On Chinese Growth Concerns, Crude Down As Saudi Promises More Oil

There are two main news updates dominating early newsflow: the first comes from BHP Billiton, after the world's largest miner raised concerns about the possibility of a sharp slowdown in demand from top metals consumer China. Per Reuters: "There is a slowing trend in China ... moving increasingly away from the growth model that they have had, which may be a little less metals intensive. This is not new, but recognition by big mining companies would have had an effect." Australian iron ore miners, key beneficiaries of China's modern-day industrial revolution, signaled on Tuesday demand growth was finally slowing in response to Beijing's moves to cool its economy. BHP Billiton said it was seeing signs of "flattening" iron ore demand from China, though for now it was pushing ahead with ambitious plans to expand production." That this comes just on the tail of JP Morgan warning of a hard landing in China is curious, and one wonder if the Federal Reserve Bank of JP Morgan is not fully intent on telegraphing that the next big center of QE will be the PBOC. The other news is that the perpetual crude "upside capacity" strawman Saudi Arabia 'has pledged to take action to lower the high price of oil, which has risen to around $125 a barrel, with laden supertankers set to arrive in the US in the coming weeks. ... Saudi Arabia said yesterday it will work "individually" and with the other petrol-rich Gulf states to return prices to "fair" levels. The country indicated earlier this year that $100 a barrel was the ideal oil price." There is one problem with this as expected Saudi attempt to help Obama's reelection campaign: as pointed out yesterday, it is very unlikely that Saudi Arabia has any realistic ability to do much if anything to push the price of crude lower, especially if and when the middle east hostilities flare up.

Overnight Session: Mixed Ahead Of Apple

With a economic calendar devoid of virtually any events, the only two events worth of note this morning are the Greek CDS auction (where RBS appears to once again be confusing price and discount), and the Apple cash announcement due in just over an hour. The result is Apple stock which in the premarket session has traded as high as a new record high og $606, even as concerns emerge that the growth phase is over as the company transitions into a MSFT-type, post-Steve Jobs existence. Details of the 9 am call can be found here. Aside from that risk is broadly flat as hungover American traders take their seats.

Daily US Opening News And Market Re-Cap: December 23

  • Volumes remained thin across various asset classes ahead of market holidays related to Christmas and the New Year, together with a light economic calendar
  • Moody’s maintained the US’s sovereign credit rating at Aaa, adding that the US rating outlook is negative on federal government debt ratio risks, and the US rating could move down if debt ratios and interest costs continue rising
  • Outperformance was observed in Gilt futures partly helped by lacklustre economic data from the UK, which resulted in the UK 10-year yield falling below the 2% level and printing record lows
  • According to European government sources, the S&P ratings report on 15 Eurozone members is expected in January

Daily US Opening News And Market Re-Cap: December 16

  • Fitch downgraded the long-term IDR ratings of seven major banks, including, Bank of America, Goldman Sachs, Citigroup, Barclays, BNP Paribas, Credit Suisse and Deutsche Bank
  • Market talk that S&P may downgrade sovereign ratings of Spain and Italy today, however the talk remains unconfirmed
  • Eurozone 10-year government bond yield spreads tightened across the board, with particular narrowing observed in the Spanish/German and Italian/German spreads
  • According to a senior Troika official, the aim of Greek talks is a voluntary debt swap, however there are no guarantees of success, adding that the Greek 2011 deficit is likely to be higher than the 9% of GDP target
  • German FDP party approved the set-up of ESM

Daily US Opening News And Market Re-Cap: December 12

  • Moody's said that the European crisis is still in a critical and volatile stage, adding that it will revisit ratings of all EU sovereigns in the first quarter of next year
  • According to S&P, it wanted to send a strong signal that the Eurozone is facing risk of a major recession, and significant credit crunch
  • The Italian/German 10-year government bond yield spread widened despite a successful T-Bill auction from Italy as well as market talk of the ECB buying Italian government paper
  • Deutsche Bank cut its UK growth forecast for 2012 to zero, and said it now expects the BoE to buy a further GBP 75bln of Gilts in February, then a final GBP 50bln in May

Daily US Opening News And Market Re-Cap: Red Friday

  • Trading volumes remained thin owing to early closes associated with Thanksgiving in the US
  • Italy paid a record premium of 6.504% on the 6-month BOT and the bid/cover remained on the softer side, however the country managed to raise the full amount in the auction
  • Market talk of the ECB buying Italian and Spanish government debt
  • According to an article in the FT, the EFSF may not be able to raise enough funds to increase its capacity to more than EUR 1trl as planned
  • ECB's Coene said that if the current trend continues, rate cut is probable

Daily US Opening News And Market Re-Cap: November 21

  • Moody's said that rising French bond yields increase the fiscal challenges facing France
  • Members of the congressional deficit reduction committee voiced little hope of a breakthrough ahead of Wednesday’s deadline to agree a deal to reduce the US deficit
  • EU's Rehn said that the sovereign crisis is hitting core Eurozone countries, and there should be no illusion
  • ECB's Nowotny said an interest rate cut is possible, adding that the ECB will consider worsening economy at the next meeting
  • Bundesbank slashed its 2012 German growth forecast to 0.5%-1% from its previous forecast of 1.8%, sees German economy entering 'difficult waters' in the coming months
  • According to sources, EU governments rejected mutual guarantees for bank term funding, adding that the German opposition was key to the decision against mutual guarantees

Daily US Opening News And Market Re-Cap: November 18

  • According to sources, ECB’s lending to IMF proposal is gaining traction, adding that talks on ECB lending to the IMF may start soon
  • Market talk of the ECB buying Italian and Spanish government debt
  • Fed’s Dudley said the Fed has done a lot to ease monetary policy and could do more
  • According to BoE’s Weale, there is a “very strong case” for extending the BoE’s money-printing operations next year unless the outlook improves

Daily US Opening News And Market Re-Cap: November 14

  • Mario Monti was handed the task on Sunday night of forming an emergency government led by technocrats
  • The Italian/German 10-year government bond yield spread widened despite a well-bid BTP auction from Italy, as concerns surrounding the Italian debt remained in focus
  • According to IFR, European banks are planning to dump more of the EUR 300bln they own in Italian government debt. Also, president of the European Banking Federation said that Europe’s banks need to keep dumping Italian banks
  • The EFSF denied a Sunday Telegraph report that it spent more than EUR 100mln buying its own bonds after failing to achieve its funding target as a sale last week
  • The Swiss economy minister warned against exerting pressure on the SNB to weaken the currency

Daily US Opening News And Market Re-Cap: November 11

  • Trading volume remains thin as Veterans Day in the US and Armistice Day in Europe is being observed
  • The new Greek government, led by ex-ECB vice president Papademos, is expected to be sworn in at 1400GMT today
  • The Italian Senate approves budget measures. According to the PM’s office, Italy’s cabinet will meet on Saturday evening at around 1700GMT, after the lower house votes on a financial stability law
  • Market talk that the ECB is buying the Italian and Spanish government debt
  • Merkel's CDU party's general secretary said that the party is poised to back a motion at its annual party congress on November 13th-15th to offer states a "voluntary" means of leaving the Eurozone

Daily US Opening News And Market Re-Cap: November 7

  • Political and debt concerns pertaining to Italy remained the main focus in the market today. News that the Italian PM Berlusconi may resign soon strengthened appetite for risk, however the news was later denied by Berlusconi
  • ECB's Mersch said that the ECB constantly discusses the possibility of ending bond-buys if Italy does not meet reform pledges
  • Market talk of the ECB buying the Italian government debt helped the Italian/German 10-year government bond yield spread to come off its widest levels
  • CHF came under pressure across the board following dovish comments from SNB's Hildebrand allied with an unexpected decline in the Swiss CPI data

Frontrunning: October 31

  • Azumi Pledges More Action After Yen Intervention (Bloomberg)
  • Japan to buy more EFSF bonds-Europe fund chief (Reuters)
  • Draghi in Battle Mode From Day One at ECB (Bloomberg)
  • Berlusconi Stays Defiant as Europe’s Crisis Focuses on Italy Reform Effort (Bloomberg)
  • Hu starts key trip to Europe (China Daily)
  • Europe will not offer China concessions for aid: Juncker (Reuters)
  • Europe Might Have Blown Last Chance to End Its Crisis (Bloomberg)
  • Schäuble calls for EU lead on Tobin tax (FT)
  • UK faces "economic suicide" if on EU margins – Clegg (Reuters)

Frontrunning: October 26

  • Incoming ECB head gives euro zone pre-summit boost (Reuters)
  • Fears Euro Summit Could Miss Final Deal (FT)
  • Merkel Puts Rescue Fund to German Vote (Bloomberg)
  • Iron ore in record slide as China demand slows (Reuters) BHP, Rio CDS Soar
  • MF Global slumps 47% on unexpected loss (FT)
  • Bankers fear political moves will kill off CDS (FT)
  • EU Banks Warn of Credit Drought in Push for Capital (Bloomberg)
  • Analysis: Obama's moves pack political rather than economic heft (Reuters)