Nikkei

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Riskier assets advanced today, as market participants reacted to yesterday’s FOMC statement, as well as reports that Greece is making progress in talks for a debt-swap deal. However despite a solid performance by EU stocks, German Bunds remain in positive territory on the back of reports that the ECB has ruled out taking voluntary losses on its Greek bond holdings but is now debating how it would handle any forced losses and whether to explore legal options to avoid such a hit according to sources. As such, should talks between private creditors and other governing bodies stall again, there is a risk that Greece may not be able to meet its looming financial obligations. Of note, Portuguese/German government bond yield spreads continued to widen today, especially in the shorter end of the curve.

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Just as certain as death and taxes, fading Goldman's FX "Strategist" has once again made everyone rich. Back on January 6 when the 0.000-batting FX guru said "With considerable downside risk in the short term, within our regular 3-month forecasting horizon, the key questions are about the speed and magnitude of the initial sell-off. If we had to publish forecasts on a 1- and 2-month horizon, we could see EUR/$ reach 1.20. In other words, we expect the EUR/$ sell-off to continue for now as risk premia have to rise initially." To which our response, naturally was: "In yet other words, if there is a clearer signal to go tactically long the EURUSD we do not know what it may be. We would set the initial target at 1.30 on the pair." Needless to say, following Stolper's recommendation, the EUR barely dipped further, and as of this morning has soared above 1.3000, helped not least of all by the record EUR IMM shorts we have been highlighting for weeks. With this, we now close our latest fade-Stolper trade at a profit of 317 pips. This is the 8th out of 8 closed and profitable "anti-Stolper" trades posted on Zero Hedge.

Macro news from Europe has refuted claims made last week that the ESM fund would be doubled to EUR 1tln, with a German spokesman commenting that the country is not of mind that ESM resources should be increased to that level. Discussions concerning the management of the EFSF and the ESM from German members of parliament have spurred talks that the funds could be run in parallel and even together in an emergency scenario. The ECB’s Weidmann has commented on his confidence in the Eurozone and the German economy, stating that current stagnation is temporary and that we should see a recovery in the Eurozone during 2012. Financial stocks have shown volatility this morning following comments from French and German Finance Ministers that banking regulations may be relaxed under the Basel III agreement, however this was later denied by the German Finance Minister.

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• Greece Running Out of Time as Debt Talks Stumble (Bloomberg)
• China Economic Growth Slows, May Prompt Wen to Ease Policies (Bloomberg)
• Spain Clears Short Term Debt Test, Bigger Hurdle Looms (Reuters)
• U.S. Market Shrinks for First Time Since 2009 (Bloomberg)
• IMF, EU May Need to Give E. Europe More Help (Bloomberg)
• Securities Regulator to Relax Rules on Listing (China Daily)
• Monti Seeks German Help on Borrowing (FT)
• Draghi Questions Role of Ratings Companies After Downgrades (Bloomberg)

UPDATE: ES leaking lower as Packers fans sell (and China's Shanghai Composite -0.8% at open and Hang Seng -1%)

Following EURUSD's modestly weak opening (though managing to hold above Friday's lows and inching higher), EURJPY has pushed to fresh new 11-year lows (and JGB yields at one-year lows). Asian equities are trading notably lower with Japan's Nikkei down 1.6% in early going (coming back a little now) and South Korea's Kospi down 1.1% so far. ES (the e-mini S&P 500 futures contract) opened lower, tried to get back up to Friday's close, failed and is now down around 6pts (at 1285) - still shy of where broad risk assets (CONTEXT) would expect - around 1280 for now - though AUD weakness (housing data bad not totally dire though carry being lifted), JPY strength (government comments on the flatness expected in Japan's recovery and safety flow) and Treasuries not open is undermining support for stock futures so far. The economically-sensitive commodities are leaking lower with Silver having given back its earlier gains and Copper down 0.75%, Oil is holding near $99 and Gold is down a smidge (and more stable than the rest) at -0.23% ($1635). The market's message is risk-off for now and we would expect Bunds to benefit (as JGBs are for now while corporate credit leaks wider) as without Treasuries open, where is risk capital going to flow.

The last time intermodal traffic dipped to this level, we were in denial about a Recession and the Dow continued to march from 11,500 in January of 2008 all the way to just above 13,000 in May.

European Indices are trading up at the midpoint of the session following strong performance from financials, however, Italian bond auction results dampened this effect after failing to replicate the success of the Spanish bond auction yesterday with relatively lacklustre demand. There has been market talk that this lull in demand for Italian bonds is due to technical error preventing some participants from bidding in the auction, but this still remains unconfirmed. Heading into the North American open, fixed income futures are still trading higher on the day having seen the Bund touch on a fresh session high and with peripheral 10-year government bond yield spreads widening ahead of the treasury pit open. Markets now anticipate the release of US trade balance figures and The University of Michigan confidence report.

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