Nikkei

There was precious little in terms of actionable news in the overnight session, which means that, like a broken record, Europe falls back to contemplating its two main question marks: Greece and Spain, with the former once again making noises about the "inevitability" of receiving the Troika's long delayed €31.5 billion rescue tranche. The chief noise emitter was Italian Finance Minister Vittorio Grilli who said he was "confident that euro-region finance chiefs will reach an agreement on aiding Greece when they meet next week." He was joined by Luxembourg Finance Minister Frieden who also "saw" a Greek solution on November 20. Naturally, what the two thing is irrelevant: when it comes to funding cash flows, only Germany matters, everything else is noise, and so far Schauble has made it clear Germany has to vote on the final Troika report so Europe continues to be in stasis when it comes to its main talking point. In fundamental European news, there was once again nothing positive to report as Euro-area exports fell in September as the region’s economy slipped into a recession for the second time in four years. Exports declined a 1.1% from August, when they gained 3.3%. Imports dropped 2.7%. The trade surplus widened to 11.3 billion euros from a revised 8.9 billion euros in the previous month. Global trade, at whose nexus Europe has always been at the apex, continues to shrink rapidly. Elsewhere, geopolitical developments between Israel and Gaza have been muted with little to report, although this will hardly remain as is. Providing some news amusement is Japan, where the LDP opposition leader Shinzo Abe continues to threaten that he will make the BOJ a formal branch of the government and will impose 2% inflation targeting, which in turn explain the ongoing move in the USDJPY higher. This too will fade when laughter takes the place of stunned silence.

The main overnight event, if not very surprising, was the formal announcement of the power moves at the top of China from the now concluding 18th Communist Party Congress, which occured largely as expected. To summarize: "Xi Jinping took the helm Thursday of a new, trimmed down Communist Party leadership that insiders said was shaped less by the daunting economic and political challenges facing China over the next decade than by bitter personal and factional rivalries within a secretive Party elite.  In a surprise move, Mr. Xi replaced outgoing Party chief Hu Jintao as head of the powerful Central Military Commission, which controls the armed forces, making Mr. Hu the first Communist Chinese leader to cede all formal powers without bloodshed, purges or political unrest. But the new leadership lineup did not include the two figures with the strongest track record on political reform, dimming prospects that a new generation of rulers is committed to tackling vested interests within its own ranks." In other words and just like after the US elections - to quote the announcement during every 2:15 FOMC release from now until eternity - "no change, repeat, no change" (and the SHCOMP closing down 1.22%, and the Hang Seng down by over 1.5% more or less confirmed this). An interactive infographic of who's the new who in China can be found here, while a summary of what this means and what to expect are here and here.  Elsewhere, the other main event was the formal announcement that, as everyone certainly expected, Europe officially is now in a recession. The euro-area economy slipped into a recession for the second time in four years, with GDP falling 0.1 percent in the third quarter. The official start date of Europe's recession is now Q3 2011. And with October Eurozone CPI pushing at a perky pace of 2.5%, one can add stagflation to the official list of terms haunting Europe.

If May Day is when Europe celebrates labor and jobs (if any), November 14 is its opposite, bizarro cousin as today Europe wakes up to a dead(er than usual) economy. The reason: virtually every European country is on strike. From BusinessWeek: "Spanish workers staged a second general strike this year as unions across Europe prepared the biggest coordinated protests yet against budget cuts that policy makers say are needed to end the region’s debt crisis. In Spain, unions said most auto and metal workers joined the strike, even as power demand was just 13 percent below usual. One of Portugal’s two biggest labor groups also called a strike, partial walkouts are planned in Greece and Italy, and French unions are urging workers to join protest marches. “This is a strike against the suicidal economic policies of the government,” Ignacio Fernandez Toxo, head of Spain’s CCOO union, told supporters late yesterday." In other words, Europe's economy which is already doing swimmingly, is about to see 1/60th of its Q4 GDP removed as virtually no economic goods or services are produced today.

It wouldn't be the New Normal if the basket case that is Europe, and its amusingly named "Union", didn't somehow manage to trip over itself. This is precisely what happened last night at the European finance ministers meeting after IMF head Lagarde and pathological liar and chair of the Europe's mostly broke Finance Minister, Jean-Claude Juncker, openly disagreed with each other, an event even the FT called a "feud" after they proposed two alternative visions for Greece, one which envisioned the 120% debt/GDP debt target goal pushed forward to 2022 (for Juncker), and on the other hand, IMF, which has been humiliated enough with its horrible predictions, and which refuses to budge from its 2020 Greek target. Per the FT: "In a rare breach, Mr Juncker told a post-meeting press conference the target would be moved to 2022, prompting Ms Lagarde to insist the IMF was sticking to the original timeline. When Mr Juncker again insisted it would be moved – “I’m not joking,” he said – Ms Lagarde appeared exasperated, rolling her eyes and shaking her head. “In our view, the appropriate timetable is 120 per cent by 2020,” Ms Lagarde said. “We clearly have different views.” Officials will meet again November 20 in an effort to reach agreement, Mr Juncker said. Despite the delay, officials insisted Greece would not default on Thursday, when Athens must make a debt payment of about €5bn without the benefit of international aid." Nothing like total coordination and organization within a monetary union that may not exit if Greece does not make its November 16 bond payment, which it likely will, by issuing debt and forcing the ECB to accept it as eligible collateral so that Greece can roll the maturity. And concluding this hilarious incident was Juncker's statement this morning that there is "no real dispute" with the IMF. When it gets serious...

Another day another sell-off…with equity markets in Europe trending steadily lower after it was reported that the decision on Greek aid will not be taken during the Eurogroup meeting scheduled for November 12. Still, EU official said that there will be no Greek default on November 16th (EUR 4.1bln redemptions) and that this redemption is to be "factored in" decision on disbursement. Separately,  analysts at Fitch rating agency noted that while current Spain’s rating is appropriate, further action would more likely than not be to sub-investment grade. Moody’s also commented on the never-ending sovereign debt crisis today, stating that actions taken by the ECB only buying time for Euro region and that a decision on France will be communicated within a few weeks. As a result, bond and credit spreads widen further today, with SP/GE 10s spread at 450 level, which is of particular importance given that this is the level at which the LCH begins to review bonds for margin requirements. Deterioration in Italian paper was linked to next week’s supply. In turn, EUR/USD and GBP/USD trended lower, with the USD index up 0.12% at last check. Going forward, market participants will get to digest the release of the latest U. Michigan Survey (Nov P), as well as macro forecasts from Philadelphia Fed.

Another day another sell-off…with equity markets in Europe trending steadily lower after it was reported that the decision on Greek aid will not be taken during the Eurogroup meeting scheduled for November 12. Still, EU official said that there will be no Greek default on November 16th (EUR 4.1bln redemptions) and that this redemption is to be "factored in" decision on disbursement. Separately, analysts at Fitch rating agency noted that while current Spain’s rating is appropriate, further action would more likely than not be to sub-investment grade. Moody’s also commented on the never-ending sovereign debt crisis today, stating that actions taken by the ECB only buying time for Euro region and that a decision on France will be communicated within a few weeks. As a result, bond and credit spreads widen further today, with SP/GE 10s spread at 450 level, which is of particular importance given that this is the level at which the LCH begins to review bonds for margin requirements. Deterioration in Italian paper was linked to next week’s supply. In turn, EUR/USD and GBP/USD trended lower, with the USD index up 0.12% at last check. Going forward, market participants will get to digest the release of the latest U. Michigan Survey (Nov P), as well as macro forecasts from Philadelphia Fed.

With expectations that Europe will once again become a flaming powderkeg after the US elections are over running high, Europe has so far not disappointed. And as usual, the focal catalyst of greatest pain remains Greece, which is only now learning what ZH readers knew days ago, namely that the Greek "austerity" vote was merely theater, and that Europe, i.e., Germany, has certainly not decided to release any of the much needed cash that Greece needs not only to run its society but to make a key bond payment on November 16. Confirming this was German finance ministry spokeswoman Marianne Kothe, who said on Friday that Eurozone finance ministers will probably not be able to decide at their upcoming Eurogroup meeting on Monday whether to disburse a badly-needed €31.5 billion loan tranche to Greece, as MNI reported earlier. "Speaking at a regular government press conference here, Kothe reminded that German Finance Minister Wolfgang Schaeuble needs the approval of the German Bundestag, the lower house of parliament, before being able to approve any further aid for Greece. “It will be difficult to achieve this by next Monday,” she said." In other words, the Greek default is suddenly in the hands of the German people, of whom at last check  about 60% wanted Greece gone. There is yet hope for Greece, with a story overnight running that George Soros is ready to commit "serious funds to aid Greece." Surely that generosity too will end well for the Greek people who by now must feel as if they are in the 5th circle of a NWO globalization hell.

Back in the late 1980s, the entire business world was obsessed with Japan. It's no wonder that this was the case: here was a country which had emerged from the ashes of World War 2 and had become the world's second-largest economy. They made high-quality cars, consumer electronics, semiconductors, plus they seemed to have a management style and work ethic that put the "good old USA" to shame.

European equities have made tentative progress this morning, led by the technology and basic materials sectors. The European morning was relatively peaceful until a flurry of activity on the back of European sources commenting that Spain are unlikely to seek ESM aid until the end of the year, and the ECB are not in a rush to commence bond-buying using their OMT facility. The delay of expectations of purchases has taken its toll on the Spanish debt markets which, despite completing their 2012 issuance smoothly today, show signs of strain as the 10yr yield breaches 5.81%, and the yield spread approaches 450bps against the German benchmark – the level at which LCH begin to review margin requirements. The pain in Spain has also impacted the EUR currency, with the major EUR/USD pair printing a two-month low of 1.2720 this morning.

The much anticipated Greek vote on "self-imposed" austerity came, saw and passed... and nothing: the EURUSD is now well lower than before the vote for one simple reason - the vote was merely a placeholder to test the resiliency of the government, which following numerous MP terminations, has seen its overall majority drop to 168 of 300, which includes the members of the Democratic Left who voted against the Troika proposal. Which means any more votes on anything split along austerity party lines and the vote will likely no longer pass. And, as expected, Germany already picked up the baton on kicking the can on funding the Greek €31.5 billion payment (due originally many months ago) when Schauble said that it will still be too early to make a Greek decision net week.  Market-wise, Europe is limping into the US open, with the EUR weaker again due to a report that Spain may not seek an ECB bailout this year (as said here over and over, Spain will not seek a bailout until the 10 Year SPGB is back at or above 7%). Paradoxically, Spain also sold €4.76 billion in 2015, 2018 and 2032 debt (more than the expected €4.5 billion) at muted conditions, thereby the market continues to encourage Spain not to request a bailout, although this may not last, as promptly after the bond auction Spanish debt tailed off, the 2Y and 10Y both sold off, and the Spain-Bund spread is back to 445 bps, the widest since October, and means Spain can finally be getting back in selloff play: and probably not at the best possible time just as everything else, which was in suspended animation until the Obama reelection, also hits the tape. Today we get two key, if largely irrelevant, central bank decisions come from the BOE and ECB, both of which are expected to do nothing much. Finally, the most important event going on right now, is the Chinese Congress. For those who missed it, our previews are here: The Far More Important 'Election' Part 1: China's Political Process and The Far More Important 'Election' Part 2: China's Market Implications.

Obama has been reelected, the Senate remains in the hands of the democrats, while Congress is controlled by the GOP. Most importantly, the printer is firmly in the hands of Ben Bernanke. In other words, nothing has changed, as was largely expected all along. The worst case scenario - a protracted litigation, challenging the results of the election - has been avoided after Mitt Romney contested shortly before midnight, and as a result the immediate downward gap in risk following the election has been largely recouped overnight. More importantly, '4 more years' of the same monetary policy and no end to currency dilution have resulted in a nearly $50 jump in gold overnight with the metal in the $1720s this morning, because while the Fiscal Cliff remains hopelessly unresolved, and the baseline scenario that the market will need to tumble to shock politicians into waking up, remains (as does Goldman's 1250 year end S&P price target), the reality is that no matter what happens, Bernanke and crew will print and monetize the coming deluge of debt (which would also have been the case if Romney had won). And with total debt set to rise to $22+ trillion over the next 4 years, a deluge it will be. Most importantly, with Obama reelected, Europe is now "off the hook" and can finally rock the boat, which means Greece can take its rightful place at the front of the domino chain. Remember: the latest Greek austerity vote is today and voting (i.e. debating) has begun, and with vote results expected later today. It also means that the military festivities in the middle east, where the US now has 2 aircraft carriers and 2 marine assault groups, can resume.

Less than impressive macro data from the Eurozone failed to depress investor sentiment and as such, equity markets in Europe traded higher as market participants looked forward to US elections. Heading into the North American open, all ten equity sectors are seen in the green, with technology and financial stocks leading the pack. Still, despite the choppy price action and lack of progress on the much desired Spanish bailout, peripheral bond yield spreads are tighter, with SP/GE and IT/GE tighter by c. 6bps. EUR/USD failed to break below 1.2750 barrier level earlier in the session and since then stages an impressive recovery, partly helped by weaker macro data from the UK.

Equity markets kick started the week on a negative footing, with the troubled Iberian giant back in focus after it was reported that the ECB is checking whether it may have contravened its own strict rules by lending to Spanish banks on overly generous terms, an ECB spokesman said on Sunday. According to press reports, Spanish banks had borrowed funds from the ECB at a preferential interest rate of 0.5% even though the creditworthiness of the T-bills they provide as collateral should have required them to pay 5.5%. The never-ending Greek drama is another factor for the risk-averse sentiment, with only weeks before the country runs out of cash and still no evidence that lawmakers will find a solution to diffuse the situation, there is a risk of another speculative attack on weaker EU states. As a result, credit and bond yield spreads widened, led by Italian and Spanish bonds, both wider by around 9bps in 10s. Despite the evident distress in credit markets, EUR/GBP is essentially flat, with GBP underperforming following the lacklustre PMI report from the UK.

As we warned here first, and as the sellside crew finally caught on, while the key macro event this week is the US presidential election, the one most "under the radar" catalyst will take place in Greece (currently on strike for the next 48 hours, or, "as usual") on Wednesday, when a vote to pass the latest round of Troika mandated austerity (too bad there is no vote to cut corruption and to actually collect taxes) takes place even as the government coalition has now torn, and there is a high probability the ruling coalition may not have the required majority to pass the vote, which would send Greece into limbo, and move up right back from the naive concept of Grimbo and right back into Grexit. Which is why the market's attention is slowly shifting to Europe once more, and perhaps not at the best time, as news out of the old continent was anything but good: Spain's October jobless claims rose by 128,242, higher than the estimated 110,000 and the biggest jump in 9 months, bringing the total number of unemployed to 4,833,521, a rise of 2.7%, according to official statistics released Monday. This means broad Spanish unemployment is now well above 25%.  In the UK, the Services PMI plunged from 52.2 to 50.6, which was the lowest print in nearly two years or since December 2010, and proved that the Olympics-driven bump of the past few months is not only over, but the vicious snapback has begun.

Judging by complete lack of move in the futures since the last time we looked at them at close of US market (if not so much the EURUSD which moments ago touched its lowest level since October 10 below 1.2865), absolutely nothing has happened in the intervening 14 hours. Which wouldn't be too far from the truth. Europe reported its manufacturing PMIs, which while largely unchanged at the consolidated (Eurozone 45.4 on Exp. of 45.3, last 45.3) and core level (Germany 46.0 vs Exp. 45.7, Last 45.7; France 43.7 vs Exp. 43.5, last 43.5) showed some weakness for the one fulcrum country that everyone looks at: Spain, whose Mfg PMI dropped from 44.6 to 43.5 on Exp of 44.1. But at least the threat the ECB will buy its bonds is there. And Speaking of Spain (whose car registrations tumbled 21.7% in October), the first external condition appeared today, when EU competition commission Joaquin Almunia said seized Spanish banks must fire half their workforce, according to ABC. Finally back in the US, the Fed's Rosengren said the Fed will not stop monetizing until the jobless rate falls below 7.25%. Luckily, with the NFP report due in 90 minutes, and the labor participation rate set to tumble once more, we may just get that in today's key data highlight which everyone is waiting for.