Shuffle Rewind 29 Oct-02 Nov " Where Is My Mind? " (Pixies, 1988)
This week in review (compared to Fri 26 Oct COB):
Click on day for related post, on title for song.
I felt we had ended the week on Fri 26 being “On the Road to Nowhere”, which essentially wasn’t that wrong a call, as markets got stuck on Sandy’s path.
As such, not the worst week to step away from my screens, as the US were shut Mon and Tue and most of Europe on Thu, bridging into the weekend, too.
Awkward to find a song for the week. Hesitated between Grease's Sandy, the NJ Boss' Sandy or Deep Purple's Smoke on the Water, but given the gravity of the situation, decided against being funny and to concentrate on the Big Disconnect between Risk and Reality, Equities and Bonds. Of course, every destruction fuels consumption at some stage, but I'm amazed that Risk was positive in a week that wasn't. Ok, China was a tick better than expected – right ahead of the governance change. Odd commodities’ behaviour (-2%) in that context, as well. Then again, the US (post-European close) was dismal.
And who is supposed to fuel that consumption, as the FED is already with the pedal to the metal and the Fiscal Cliff is not yet handled. Bah... We'll see after the elections, won't we?
Talking of changes, the Chinese Communist Party congress starting Thursday is bound to have more impact on the long term. Won't have hanging chads counting problems there, I guess. With data probably published to keep everyone’s face for the immediate future, things might be biased differently once the change of the guards will have taken place.
Europe-wise things moved from unchanged to unchanged with a negative bias.
And as Star War fan, I do shudder at the idea of a Disney-sequel... Maybe, though, we'll get the answer to the burning question, who Donald's father is, as the Duck family only seems to have Uncles (…). Bah.
Where Is My Mind? [Tyler, that one's for you...]
Whatever, as mostly away from my screens, this will be just a rapid fly-over.
So, as last week: Nothing new. Spailout OMT still not in play – and might not be this year's business. Officially. Hmmm... Yeah. Sure. We'll see. Greece, haggling not over.
Bonds, especially the Safe Havens, back with a vengeance. Better still than last week, despite equity-only Risk On behaviour. Makes sense given the Sandy destruction and the general sense of Europe going soft. Bunds well through 1.50% again and best performer (alongside the still tightening EFSF 10 YRS). Again some good compression on the Agencies side in general. France was again a laggard (after a long end auction), now trading 12 over EFSF (from 7) and 20 through Belgium. France / Austria pair to start divorcing.
And look who’s back flirting with the 0.000%-mark! Our friend the Schatz. If that is supposed to be an expression of strong Risk On…
Rather eventless, however non-hysteric slide in Periphery bonds: Spain out by 7 in 10s to 5.64% (419 to Bunds), Italy by 4 to 4.93% (348 to Bunds). Short end about stable with 2 YRS BONOs at 3.03% (+1) and BTPs at 2.22% (-4). 2-10 curves remain about stable – and still steep – at 272 (+8) for Italy and 262 (+7) for Spain. Symbolic key levels all in place: 2% for short Italians, 3% for Spain. 5% uncomfortably in sight for Italy. 5.50% former key stress level for Spain a resistance that wasn’t broken for good. Bunds spreads widening. Nothing positive, although stress contained.
EUR swap curve totally unchanged over the week.
Credit rather uninspired. Somehow in line with equities, but just so. Half of last week’s losses recouped. Talking about ticks, here. Cross ok at 3.9% tighter.
European equity rebound, decoupling from the US. EStoxx back on the closing levels of 19 Oct (2536), S&P just half that (at European closing), worse if considering the weak Friday close (1438 on 19 Oct). European equities taking strength from US not tanking doesn’t seem the strongest trigger for a rebound. But, hey, Where IS My Mind?European equities still clinging to 50ds average levels and this week closing above: EStoxx 2509 (2547 close), as for the DAX 7256 (7364 close), CAC 3458 (3492 close), MIB 15677 (15769 close) & IBEX 7816 (7969). So roughly 1.5% over 50d, that’s the 1.5% gained over the week.
To complete average levels: 100d for INDU 13107 (through at 13093 on NY close) and SPX 1399 (1414 NY close, 1% away), hence not that far. NASDAQ 100d 3012 (through at 2982 close) and 200d 2979 (Uuuuh, on it), as Apple-challenged, closing down 3.3% on Fri at 577 (200d 590).
Given the dismal US close, once Europe was already home, expect to gap down on Monday.
Commodities once more in the doldrums, roughly down 2% across the board. Gold dim at below 1700.
Uninspiring new issues in small week. Some Nordics covereds.
On the week (compared to Fri 26 Oct COB):
10 YRS Yields: Germany 1,45% (-9); Luxembourg 1,59% (-5); Netherlands 1,70% (-8); Finland 1,72% (-4); Swaps 1,77% (-4); EU 1,83% (-6); Austria 1,95% (-6); EIB 2,00% (-5); EFSF 2,10% (-8); France 2,22% (-3); Belgium 2,42% (-3); Italy 4,93% (+4); Spain 5,64% (+7).
10 YRS Spreads: Luxembourg 14bp (+4); Netherlands 25bp (+1); Finland 27bp (+5); Swaps 32bp (+5); EU 38bp (+3); Austria 50bp (+3); EIB 55bp (-10); EFSF 65bp (+1); France 77bp (+6); Belgium 97bp (+6); Italy 348bp (+13); Spain 419bp (+16).
EUR swap curve: 2-5 YRS 51bp (unch); 5-10 YRS 82bp (unch); 10-30 YRS 58bp (unch).
2 YRS German BKOs closed 0,003% (-5) and 5 YRS OBLs 0,46% (-8), on the week, with UST at 1,72% (-5). Hey, look who’s flirting with the 0.000% again!
Swiss 2-years tightening to -0.235% from -0.215, but again underperforming German Schätze.
Main at 128 from 129 (0,8% tighter); Financials at 172 after 175 (1,7% tighter). Cross at 514 from 535 (3.9% tighter).
Stoxx Futures at 2540 / +1,8% from 2494 with S&P minis at 1420 / +1,2% from 1403, at European COB last week.
VIX index at 16,6 after 18,5 last week.
Oil 85,4/106,5 (WTI/Brent) from 86,1/109,3 (-0,8%/-2,6%). Gold at 1676 after 1714 (-2,2%). Copper at 348 from 355 (-2,0%) . CRB closes 292,0 from 298,0 (-2,0%).
BDY retreated to 986 below the 4-digit mark broken 10 days ago, down 6% from 1049 and 11% from 1109 spike a fortnight ago. All iPads and Xmas presents now shipped???
Summer rebound peak had been 1162 early July (17.8% away). Feb low of 647 (34% away). Sep low was 661.
EUR 1,284 after 1,294 last Friday
Greek guesstimate: Closing the week much wider at 18% from 17% and 15.75% from 15% (in yield) in 2023s and 2042s. The SOMEHOW.GREECE.WILL.BE.SAVED.-mantra fast becoming a hoarse whisper...
All levels Friday COB 17:30 CET
Fast-forward Macro and Events:
Not much exciting data. German Factory orders to name one on Tue. ECB on Thursday, of course.
Uninspiring, supply-wise. Usual Core bills. German 5 YRS on Wed. Spanish bonds on Thursday, always good for some excitement.
US 3 YRS on Tue, 10 YRS on Wed and 30 YRS on Thu.
US elections, of course. Chinese Party Congress - pre-decided. No hanging chads to be expected.
EZ: Mon Sentix Confidence fcst -21 after -22.2; Tue Final Oct PMI Composite 45.8 and Services 46.2, PPI fcst 2.6% after 2.7%; Wed Retail Sales fcst -0.1% MoM /-0.8% YoY after +0.1%/-1.3%; Thu ECB
GE: Tue Factory Orders fcst -0.5% MoM after -1.3% MoM (-4.8% YoY); Wed IP fcst-0.6% after -0.5%; Thu Trade with Exports fcst -1.5% MoM after +2.5% and Imports fcst -0.4% after 0.4%; Fri CPI fcst unch 2.1% YoY.
FR: Fri Biz Sentiment (last 92), IP fcst -1% MoM /-0.1% YoY after +1.5% /-0.9%, MfG fcst -1.3% MoM/-0.1% after +1.8%/-0.4%
Italy: Fri IP fcst -1.6% MoM/-4.7% YoY after +1.7% /-5.2%
Spain: Mon Unemployment; Wed IP fcst -3.5% YoY after -3.2%
US: Mon ISM fcst 54.5 after 55.1; Thu Trade Balance, Claims; Fri U Michigan Conf, Wholesale Inventories, Import PX
China: Fri monthly data dump CPI, IP, Retail Sales; Sat Trade
Click link under title or below for today’s musical support: