Finland

Congratulations Mario Draghi, you promised unlimited bond buying and you bought less than one month’s worth of gains for Spain. If you want proof positive that Central Banks are losing their grip on things, the above chart is it. The moment we take out that trendline again, it’s GAME OVER (what more can the ECB promise?)

Spacy week, though… Song pick of yesterday’s said it all. Somehow, things have spun out of control and the rocket started stalling and then drifting into the void…

Poor Major Tom left the capsule too early.

Regional elections in Spain over the weekend. As Rajoy denies there’s any pressure to seek help, BONOs slide. Damned if you don’t; damned if you do…

Interesting to see Core EGBs’ only muted reaction to the fading Risk sentiment, though (Bunds and UST still +15 on the week).

First “decent” Spanish auction in ages, decent being just normal, if not even boring. In absence of hard facts, outside the hypnosis trick “All will be well! Believe me…", I’d like to remain on the cautious side, though.

On EU decisisons, it could look like Good Cop / Bad Cop act, if it wasn’t clear that the players actually mean what they are saying.

Won't be EZ...

The world is running down a quite slippery slope in its attempt to avoid calamity. The political machines in Europe and the United States and to a real but lesser extent in China have passed the hat to their central banks because either they cannot or will not face up to the severity of their problems. This “faith based initiative” is misplaced, as liquidity and faith are driving the boat and derelict accounting is providing the fuel. The United States, having moved far past the “safety net” that has always been in place, are faced with a very real choice between Socialism and Capitalism. In Europe the problems are also of a fundamental nature as the definition of “More Europe” in Germany is decidedly different than the definition in Spain. But the fantastical belief that the Central Bank will wave it magic wand and make everything all good again is the stuff of Mommy kissing the boo-boo and everything will be just fine.

European Risk remains buoyant (unlike in the US), but the question is whether Moody’s upholding Spain a tick above Junk is really worth a 30bp plus relief rally?

Hmmm… Bunds getting trashed by equities and Spailout; Spain getting a lift on the latter, but a break from Greek Troika news and German back pedalling.

Spain better, but had lost 20 bp just yesterday.

Equities stopping out and squeezing. Credit ripping tighter.

Risk On, but not everywhere. Wild...

European equities trying to decouple from EGBs and US equities, trying to trade “No news is good news”.

Low action day.

Short term trading strategy buy Spain on weekend bail-out hopes and resell rapidly might need to be deepened. Not much to chew on eventually.

A new week begins. Here are the major global market-moving events to look forward to for both the next week, and for the remainder of October and November.

Particularly light on hard data, take away from this week’s action was reduced volatility in the EGB world (unlike rather more jumpy and eventually depressed equities).

After rainy weeks, better weeks, we pretty much had a rather sleepy week.

Stronger Periphery trapping European equities, with the latter dragged down by US apathy.

Risk adverseness factors (equities – Periphery - EUR) decoupling.

US equities seem utterly tired.

Somehow the last months’ rally ahead of QE has tired everyone and since delivery every step seems sooooo heavy.

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.

Eerily quiet after yesterday’s post-ECOFIN cacophony…

No real take-away today: sometimes you need a breather and everyone agrees.

The overnight session has been largely listless, with the market digesting a less than impressive start to earnings season by Alcoa, which reported declining cash flows, and various other negative earnings preannouncements out of major industrial companies. The IMF has not helped the somber mood with its analysis that by the end of 2013 European banks will need to dispose of up to $4.5 trillion in assets. Asian weakness (even the SHCOMP couldn't rally much on further easing rumors for the simple reason that the PBOC will simply not ease with QEternity out there and a food price hike over the horizon) has dominated the trading session so far. What little goods news there was came out ironically out of Italy and France, both of which reported better than expected August Industrial Production data. Italy IP rose 1.7% on expectations of a -0.5% drop, and up from -0.2% last, while the French Industrial Production posted a surprising surge, following weeks of poor data out of the country, with IP up 1.5% on expectations of a -0.3% print, and up from last month's 0.6%. However, even France warned not to read too much into a number driven by, well, cars and drinks.

Key take-aways from today were: The IMF is gloomy, so is Draghi. Banking Union is months away. ESM and OMT ready to go, but no one wants that first dance. Spain is analyzing.

Oh, and an iPhone is just that. A phone.

Nothing new, nowhere.

Didn't get fooled again yesterday, but still facing denial today...

Overnight sentiment is decidedly negative, following the across the board cut of growth forecasts by the IMF late yesterday. The only bright light was the PBOC dumping 265 billion yuan ($42.1 billion) in reverse repos in an open-market operation (a liquidity adding operation) whose only purpose was to roll the massive reverse repo from before the Golden Week. The resulting 2% jump in the Shanghai Composite came as traders expect an imminent rate cut by the PBOC. The irony of course is that as long as Reverse Repos are the liquification instrument of choice, the local central bank will do nothing else in an economy which is once again overheating in several industries, the most important of which continues to be housing. Furthermore, as long as the spectre of a 15% surge in pork prices is over the horizon, the PBOC will do nothing. Period. Elsewhere, as BBG summarizes, FX is mostly modestly lower with the AUD outperforming on rising iron ore price. Metals mostly modestly lower despite the crippling South African strike which has now migrated to catch iron ore mines as well. Treasury yields moderately lower, partly in catch-up after yesterday’s holiday. Bund yields modestly higher sovereign-to German yield spreads mixed with mostly modest changes. Few if any macro economic news today.