Greece

AVFMS's picture

Bizarrely, and even after slapping my screens several times to make sure things were working, real opening levels in EGBs very quite simply FLAT. All flat! Haven’t seen that in ages!

Had to slap my screens again tonight, given the tons of “unchanged” data in EGBs. Have decorrelated from equities, as has the USD (closing about unchanged).

The Operatic Grandeur Of "More Europe"

Europe is becoming quite strange. The World is becoming quite strange. A politician gets up and speaks and says nothing, no one listens to what he said, then he is roundly congratulated for his bold words that were heard by no one and then everyone disagrees with what they think he might have said. The Continent seems to be in a dream-state where the worse it gets; the better it is because the ECB will be drawn in and provide liquidity like the ever-after will provide Redemption. I am not sure America is any better actually. In the United States we admit we are printing money while in Europe they “print and deny” but the outcome is about the same. Economic and fiscal reality is a thing of the past as the world’s Central Banks will provide manna, sustenance and well-being.

Daily US Opening News And Market Re-Cap: September 28

The "mañana" approach to fiscal management, that Spain is known for, presented what is generally perceived as overly optimistic growth forecasts for 2013 and lacked details on structural reform resulted in another risk off session. As a result, Spanish stocks continued to underperform (IBEX seen lower by over 5% on the week), with 10y bond yield spread wider by around 12bps as market participants adjusted to higher risk premia. The state is due to sell 2s and 5s next week, which may also have contributed to higher yields. As a reminder, Moody’s review on Spain is set to end today, however there is a chance that the ratings agency may extend the review for another couple of months or wait until the stress test results are published to make an announcement. In other news, according to sources, Greece could return to its European partners for a Spanish-style rescue of its banking sector, as the country is looking to ease the burden via another writedown of its debts or a strong recapitalisation of its banks (no official response as yet). Going forward, the second half of the session sees the release of the latest PCE data, as well as the Chicago PMI report for the month of September.

Frontrunning: September 28

  • China accuses Bo Xilai of multiple crimes, expels him from communist party (Reuters), China seals Bo's fate ahead of November 8 leadership congress (Reuters)
  • "Dozens of phone calls on days, nights and weekends" - How Bernanke Pulled the Fed His Way - Hilsenrath (WSJ)
  • Fed won't "enable" irresponsible fiscal policy-Bullard (Reuters)
  • PBOC Adviser Says Easing Restrained by Concerns on Homes (Bloomberg)
  • Data Point to Euro-Zone Recession (WSJ)
  • Fiscal cliff dims business mood (FT)
  • FSA to Oversee Libor in Streamlining of Tarnished Rates (Bloomberg)
  • Monti Says ECB Conditions, IMF Role Hinder Bond Requests (Bloomberg)
  • Japan Heads for GDP Contraction as South Korea Weakens (Bloomberg)
  • Moody’s downgrades South Africa (FT)
  • Madrid Struggles With Homage to Catalonia (WSJ)

Overnight Sentiment: Spanish Budget Hangover And Month End Window Dressing

Those confused by yesterday's rapid move higher in stocks, which fizzled by day's end, which was catalyzed by the non-event of the Spanish budget declaration which will prove to be a major disappointment as all such announcement are fated to be, can take solace in the following summary by DB's Jim Reid: "Yesterday's risk rally on the back of the 2013 budget announcement coincided with a trend seen over the last couple of years of rallies into month and quarter ends. We'll probably get a clearer picture of underlying sentiment by early next week with the new quarter starting, especially as it commences with a bang with the Global PMI numbers on Monday." In this vein, tonight's overnight sentiment showing weakness confirms yesterday's move was one which merely used Spain as a buying catalyst without reading anything into it. Because an even cursory read through shows major cracks. Sure enough the sellside readthroughs appeared this morning: "In our view the Spanish 2013 budget is based on a too optimistic GDP growth assumption" from Citi. Once again, the market shot first, and asks questions later, as the weakness in the futures confirms, EURUSD retracing all overnight gains, and Spain now 1.6% lower on this, as well as uncertainty of today's latest non-event - the local bank stress test vers 304.2b - whose results will be announce at noon NY time, and which just may find Bankia (and its Spiderman towel collection) is quite solvent once again.

The Financial Crisis Of 2015 - A Non-Fictional Fiction

The financial crisis of 2008 shook politicians, bankers, regulators, commentators and ordinary citizens out of the complacency created by the 25-year "great moderation". Yet, for all the rhetoric around a new financial order, and all the improvements made, many of the old risks remain (and some are far larger). The following 'story' suggests a scenario based on an 'avoidable history' and while future crises are not avoidable, being a victim of the next one is.

"John Banks was woken by his phone at 3am on Sunday 26th April 2015. John worked for Garland Brothers, a formerly British bank that had relocated its headquarters to Singapore in late 2011 as a result of..."

Ambrose Evans-Pritchard's Contrition

In a fiery article written today, Telegraph's Ambrose Evans-Pritchard unleashes a scathing critique of Europe's AAA club for daring to demand that Spain actually follow through with what they have been pretending to be doing, namely cutting spending and promoting improved government tax collections. We now know that Spain did neither, with spending increasing while tax revenues dropped from last year (and as we will not tire of pointing out, if the government has lost sight of the ball, and the economy is collapsing, it is not due to a cut in spending but due to its own inability to govern - something the people in a democratic regime usually are quite capable of fixing on their own). But complying with agreements in a broke Europe is not part of the New Normal. His summation, phrase briefly is as follows: "We discover – yet again, you might say – that Germany, Holland, and Finland will not stand behind their solemn pledge of solidarity when push comes to shove. Spain’s premier Mariano Rajoy has been betrayed. Nobody should be entirely surprised if he and the Spanish arch-nationalists in his circle offer a condign riposte, and bring down the entire temple on the heads of the creditor powers." Of course, none of that is true, and what Germany, Holland and Finland are doing is doing their best to get dragged into the money pit that the rest of their insolvent socialist neighbors can so efficiently dug in the last several years.  What the article really is, is simply Ambrose's contrition for misreading the balance of power in Europe. Like so many others, he was all too eager to swallow the misdirection narrative that as a result of Mario Monti's stubborn gambit at the June 27th Euro-summit, the balance of power had finally shifted from the exporting, rich and quite solvent nations, to their liquidity and bailout addicted neighbors, something we claimed all along was a major mistake.

AVFMS's picture

In absence of really negative news, outside the heavier macro / sentiment data, the lukewarm Italian auction and US data, markets remained on a slight tentative rebound.

Will need to await further details and overnight analysis of the Spanish budget. Lots of reforms...

Hmm, and in how much time can all that be passed - if at all???

Cashin Concerned On Europe But Egyptian Streets Worry Him More

European riots protests are on UBS' Art Cashin's mind. Furthermore, Art notes that Spain has seen a fifth region (Castilla La Mancha) request a billion-euro-bailout (along with Catalonia's secession concerns) and Greece is hotting up. However, it is Egypt that is becoming an increasing concerning for the avuncular aristocrat of the exchange floor, as he fears the region's growing instability along with its potential need to devalue the pound may see the current 'sporadic outbursts of social unrest' spill over into more broad based protestations on the streets of Cairo.

"Not Counted" Does Not Mean "Not There"

The ECB has $15 trillion in loans outstanding to Europe. They claim a $4 trillion balance sheet based upon not counting guaranteed loans by various nations and by not counting contingent liabilities. This is the same scheme that is used for calculating the debt to GDP ratios of the countries in Europe. If a loan, a debt, is guaranteed by a nation or if the liability is “contingent;” it is not counted. This, of course, does not mean that possibility of having to fund or write-off something is not there; it just means it is not counted. Do not disregard or minimize the recent announcement by Germany, Finland and the Netherlands that was joined twenty-four hours later by Austria. The funding nations in Europe placed a line in the concrete when they rejected assisting legacy issues and loans. This group of nations vacated, in this one statement, all of the pleas and demands of the periphery countries that had lined up for aid and ever-more aid relying upon the pledges of the solidarity of Europe and they got an answer, a very Germanic answer which is not, I am quite sure, what they wanted to hear.

Frontrunning: September 27

  • Madrid Protesters March Again as Spain Braces for Cuts (Bloomberg)
  • Euro Can Bear Fewer Members as Czech Leader Calls Greeks Victims (Bloomberg)
  • Chinese Industrial Profits Fall 6.2% in Fifth Straight Drop (Bloomberg)
  • China pours $58bn into money markets (FT)
  • Beijing vows more measures on Diaoyu Islands (China Daily)
  • Noda vows no compromise as Japan, China dig in on islands row (Reuters)
  • Politico’s Paul Ryan Satire: The Joke’s on Them (Bloomberg)
  • Electoral Drama Shifts to Ohio (WSJ)
  • German opposition party targets banks (FT)
  • Fed action triggers fear of new currency wars (FT)
  • Ex-Credit Suisse CDO Boss Serageldin Is Arrested in U.K. (Bloomberg)
  • Romney ‘I Dig It’ Trust Gives Heirs Triple Benefit (Bloomberg)

Overnight Sentiment Better As China Joins Global Easing Fest... Sort Of

After seeing its stock market tumbling to fresh 2009 lows, the PBOC decided it couldn't take it any more, and joined the Fed's QE3 and the BOJ's QE8 (RIP) in easing. Sort of. Because while the PBOC is prevented from outright easing as we have been saying for months now (even as "experts" screamed an RRR or outright rate cut is imminent every day while we warned that Chinese inflation has proven quite sticky especially in home prices and food and China's central bank will not attempt to push its stocks up as long as the situation persists, so for quite a while) it can inject liquidity on a ultra-short term basis using reverse repos (or what are called repos here in the US). And shortly after it was found that Chinese companies industrial profits fell 6.2% in August after tumbling 5.4% in July, we learned that the PBOC added a record 365 billion Yuan to the financial system in order to prevent a creeping lockup in the banking system. While this managed to push the Shanghai Composite by nearly 3% overnight, this injection will prove meaningless in even the medium-term as the liquidity is now internalized and the PBOC has no choice but to add ever more liquidity or face fresh post-2009 lows every single day. Which it won't as very soon it will seep over into the broader market. And as long as the threat of surging pork prices next year is there, and with a global bacon shortage already appearing, and food prices set to surge in a few short months on the delayed effects of the US drought, one thing is certain: China will need a rumor that someone- even Spain- is coming to its rescue.