Hmmm… Need to find another way to kill time until Year End. Morning highs, lunch time lows and then trailing the US. EGBs on the stronger side with augurs seeing a weakening Germany and calls for lower rates putting the EUR under pressure. Ok, Germans: now work! Somebody has to pay the bills!
"Bruttosozialprodukt " (Bunds 1,3% +1; Spain 5,45% -1; Stoxx 2597 -0,3%; EUR 1,295 -20)
Strong start in Risk to take out new 2012 highs in Equities and trying to retrace near 2012 Credit lows, too. Core EGBs cool. Bunga Square’s rug pulling scuttled all that easy living by noon, weighting on the Periphery and boosting Core EGBs. ECB gloomy. Equity – bond divergence not a flyer yet, though… US sideways and Risk Watchers back to scanning European politics. EUR falling of the carpet.
"Magic Carpet Ride" (Bunds 1,29% -6; Spain 5,46% +8; Stoxx 2605 +0,6%; EUR 1,297 -100)
Lather. Rinse. Repeat. Over and over. Europe doing about fine on its own and with an urge to test higher risk levels, in absence of negative news. Spanish BONOs feeling sad… US look more fickle. Is the fruit getting bad? Question of Muppets getting nervous out of boredom, or what?
"Furry Happy Monsters" (Bunds 1,35% -4; Spain 5,38% +15; Stoxx 2589 +0,1%; EUR 1,307 -10)
To think it took a really ugly economic number, such as the Services PMI reported last night, to stir the Chinese stock market out of a hypnotic drift lower, and push it up by 2.7%. Why? Because in the New Normal bad economic news means hope that central banks get involved, and as we have explained the ongoing SHCOMP collapse is purely a function of the PBOC remaining on the sidelines. Last night, rumors (very unfounded and very incorrect) that the central bank would intervene put a stop to the drop. Sadly, as the PBOC has no intention of ending its ultra-short term reverse-repo driven market support strategy, the bounce will be very short lived. However, that coupled with more jawboning out of the BOJ that it would act, if it has to (whether under Abe or Noda), sent the JPY even weaker, and futures ramping on tiny overnight volume which wiped out all the previous day's losses.
Forget Citius, Altius, Fortius ("Faster, Higher, Stronger"), the real Olympic challenge among Europe's nations is Pinguissimam, Ignavissumi, Bibe Maxime (Fattest, Laziest, Drunkest). As WaPo notes, there's nothing like tales of butter-eating, wine-guzzling, yet somehow-still thin Europeans to add to American angst over holiday calories and upcoming resolutions, but while overall Europeans are fairly healthy, a recently-released report by the Organization for Economic Cooperation and Development (below) found that the prevalence of diseases such as diabetes and asthma has also increased — in part because of better diagnosis, but also thanks to underlying causes such as drinking, smoking and eating fattening foods. Here’s a look at which Europeans are most obese, most inactive and drink most (no, it's not the Brits):
Lather. Rinse. Repeat. Europe doing about fine on its own and with an urge to test higher risk levels, in absence of negative news. US more fickle on FCDRE. If this goes on until year-end… If it wasn’t for a bit of FCDRE… Tick. By. Tick. Movements. Equities high. Soft Core closing on historic lows.
"11 O’Clock Tick Tock " (Bunds 1,39% -2; Spain 5,23% -1; Stoxx 2587 +0,3%; EUR 1,308 +20)
Fiscal Cliff Discussion Risk Event still very much alive. Spain maths on budget. Italian maths, French… Bah… Still feels like things are a bit out of touch with reality here (equities vs. bonds). And that Greek buy-back looks really, really generous. Outwordly. Then again, best way to get rid of private ownership. After the OMT, the OPM… Obviously, other people’s money. PMI paint a slightly less bleak picture, but on rock bottom levels.
"Out Of Touch" (Bunds 1,41% +3; Spain 5,24% -6; Stoxx 2580 unch; EUR 1,306 +50)
Hey, this was cuddle time-week! A big Hug for everyone: Bonds, Equities, Periphery, ah, Periphery bonds! Greece…
As Super Mario said himself on Friday, albeit in a different context: “We were living in a Fairy World”. Cute way of spelling it out.
Fairies, rainbows, wonderful world… Let’s put IZ on the case!
"Somewhere Over The Rainbow" (Bunds 1,38% -6; Spain 5,30% -30; Stoxx 2580 +1,1%; EUR 1,301 +50)
Following some well-timed 'suggestions' in Natural Gas and Apple this year, the new bond guru has some rather more concerning views about the future of America. Reflecting on a dismal outlook progressing due to the fact that "Retirees take resources from a society, and workers produce resources", Gundlach has cut his exposure to US equities (apart from gold-miners and NatGas producers) noting their expensive valuation and low potential for growth. In a forthcoming Bloomberg Markets interview, the DoubleLine CEO warns we are about to enter the ominous third phase of the current debacle (Phase 1: a 27-year buildup of corporate, personal and sovereign debt. That lasted until 2008, when Phase 2 started, unfettered lending finally toppled banks and pushed the global economy into a recession, spurring governments and central banks to spend trillions of dollars to stimulate growth) as deeply indebted countries and companies, which Gundlach doesn’t name, will default sometime after 2013. "I don’t believe you’re going to get some sort of an early warning," Gundlach warns "You should be moving now."
Europe rather direction-less on its own. Equities still rather firmer than not; with Bonds just the same. Macro data generally rather bleak, although expectations have been put so low lately that anything about palatable will do. Peeking over the Pond to see whether Fiscal Cliff discussions could scuttle things. Here late valuations are such that numbers should be really good to get things going. So: Drifting. Chatting. Checking.
"What's Up?" (Bunds 1,38% +1; Spain 5,3% -2; Stoxx 2580 unch; EUR 1,301 +30)
Looks like yesterday put into practice: Let’s thank everyone to turn around markets, when they sink. Nothing to break the barn stomp in Periphery bonds (but themselves). Italy brilliantly stuffed its primary dealer at a 2-year low. Core EGBs holding quite steady, given ROn in Risk and Periphery. Strong US GDP revision – but, as expected anyway. Given the actual level in Risk, good numbers are seen as given. Nothing weak, no more, never. Swimming in a Sea of (Risk) Love. Watch the Event / Headline risk on FC (& Greece. The math still seems quite odd…). Hard Periphery (especially Spain) slap-back in the afternoon, though.
"Sea Of Love" (Bunds 1,37% unch; Spain 5,32% +1; Stoxx 2579 +1,3%; EUR 1,298 +50)
Once more, not much own stuff to chew on Europe’s own. Drifting. EGBs very strong on (relative) equity weakness. Periphery starting to glow like the ZZ Top Eliminator. In absence of any strong lead, need to start thanking everyone for input and support (Mario, Ben, Angie, Chrissie… Anyone working on the Fiscal Cliff. Mariano & Mario. Wolfie...). New paradigm put into practice: nothing will ever be weak again, nothing. And watch out for FC Ping-Pong! And I Thank You!
"I Thank You" (Bunds 1,37% -6; Spain 5,31% -20; Stoxx 2547 +0,4%; EUR 1,293 unch)
Where will the €10bn for the buyback come from? This is far from clear but it is hard to imagine it being found anywhere other than the bailout funds, meaning a new transfer of around €9bn will be needed. This again poses significant political problems as leaders in Germany, the Netherlands and Finland (to name but a few) try to convince their parliaments (and public) that this is not more money into a black hole. It has been suggested that some of the other mechanisms mentioned below could be used to fund the buyback, but this looks impossible since they are being tapped to fill the existing funding gap. These substantial obstacles to a successful debt buyback are crucial since the IMF has already stated its on-going participation in the Greek bailout hinges on this policy. The likes of Finland and the Netherlands have also previously stated that IMF involvement is requirement if they are expected to continue to aid Greece. With a plan on the buyback expected to be in place by 13 December, to allow for the release of the next tranche of bailout funds, this deal could hit a wall even sooner than many expected.
Ok. It’s not that the Greek deal is nothing. But then again, third strike. Eventually expected, or at least hoped for. Hence, lack of concrete follow-through. So, now it’s there. And now what? You Ain’t Seen Nothing Yet? What is there to see??? Pitch the markets some input, something concrete, something to feed off, something to see!
"You Ain't Seen Nothing Yet" (Bunds 1,43% +2; Spain 5,51% -9; Stoxx 2538 -0,2%; EUR 1,293 -30)
Hard pressed to find anything remotely exciting today. Equities losing a little shine, but understandable given last week’s 5% rush (and 14% tightening in Credit). Bonds stuck in range. Fiscal Cliff hailing back (in yet rather timid manner, though). Waiting on Greek rescue revelations. Yawn!
"Sailing" (Bunds 1,41% -3; Spain 5,6% unch; Stoxx 2542 -0,4%; EUR 1,296 unch)