05 Nov 2012 – “ Nothing Really Matters ” (Madonna, 1999)Music Link
Take-away: Nothing really mattered… Eventually. Europe correcting Friday’s excessive optimism, in line with the US, treading water ahead of the elections. Still, the Periphery remained under (controlled) pressure with Spain cornering most, if not all negative headlines today – ahead of Thursday’s auction. 10 YRS periphery backing up to (selective) symbolic levels of 5% and 5.75% (damn’ near 6%).---
While Friday’s European session (and the week overall) ended in a surprisingly mixed manner with equities squeezing out yet some more upside, while safe haven bonds enjoyed a stronger session, too, the US close was rather poor with US indices losing about 1% once Europe headed into the weekend with some downside key levels broken: 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 (Right on it), as Apple-challenged, closing down 3.3% on Fri at 577 (200d 590).Asian week opening hence unsurprisingly in the red, down about 0.50% across the board, ahead of tomorrow’s US show-down and Thursday’s start of the Chinese Change of Guards congress.Mixed Chinese PMI data with the official Oct non-Mfg (unsurprisingly) better at 55.5 after 53.7, but with HSBC’s Service one down to 53.5 from 54.3.Weekend news flow rather on the thin side. Merkel cautious on the end of the crisis (yet another 5 years), not to be confused with Hollande’s call (over). Greece situation still Homeric.
Spanish unemployment surging to 128.2k from 79.6, far above a +110k forecast, setting the scene for some Periphery discomfort.
Europe kicking off the week in unsurprisingly corrective mood, although 0.5% off equities doesn’t seem to be wild (considering e-minis down 1% from European COB). EGBs gathering strength again, with not much in terms of Core supply on the plate to weight on the markets this week (outside US auctions). Risk Off mood with 10 YRS Bunds opening 2 tighter at 1.43% and our sneaky friend Schatz dipping a toe in negative territory at -0.008% (1 tighter) for the first time since early Sep. Periphery defensive with Spain out by 8 to 5.72% in 10s and 3.10% in 2s, taking Italy hostage with 10s flirting the 5%-mark (+6) and 2s 5 wider, as well. Credit soft at +3/5 points (2.5-3%). Commodities a tick weaker. EUR opening through the 28-handle for the first time since early Sep, too.
Government supply restricted to uneventful bill sales. Dutch bills for about EUR 1.2bn each in 3m at -0.030% (after -0.037%) and 6m at -0.012% (after -0.21%). Weekly French fare with EUR 3.8bn 3m at -0.014% (after -0.022%), EUR 1.6bn 6m at -0.007% (after -0.012%) and EUR 1.4bn 12m at +0.019% (after +0.015% ). Micro ticks wider.Will get some Greek 6m (last 4.46% ), EFSF 3m (last -0.433%) and Belgian 3m & 6m bills tomorrow (last -0.003% and +0.017%), as well as about EUR 1.3bn in Austrian 2019 (last 1.33%) and 10 YRS (last 2.36%, albeit back in June). COB RAGB 2019 1.25% and 2022 1.93%.EUR 4bn OBLs on Wednesday. Supply-highlight of the week will be Spain on Thursday with EUR 4.5bn of 3 YRS, a new 5 YRS 4.500% Jan 2018 benchmark and even venturing into a 2032 increase. Last auctions were 18 Oct for a combined EUR 4.61bn in 3, 4 and 10 YRS and 04 Oct for EUR 4bn 2, 3 and 5s
Interesting to have Almunia now weighting (and siding) in the regional independence question (Catalonia), stating the EU membership would only follow application, which doesn’t seem very forthcoming.Sentix investor confidence better than expected, but without anyone caring (-18.8, fcst -21 after -22.2).
Midday picture in continuous Risk Off with Bunds at 1,43% (-2), OBLs at 0,45% (-1), BKOs -0,005% (-0,8) and UST at 1,69% (-3).Spanish 2s at 3,08% (+5), 10s at 5,73% (+9). Spanish 2-10s 265bp (+3).Italian 2s at 2,25% (+3), 10s at 5,00% (+7). Italian 2-10s 275bp (+3).Equities stabilizing at -0.75%. Credit eventually only out 1 or 2 ticks (around 1%). Commodities about unchanged from morning levels with the EUR trying to fight back into the 28-handle.No US data to kick-off the afternoon (with the US back to winter time, too; so no more “short” days with figures popping while chewing).
Spain back on the radar with the announcement of Thursday’s auction size as being EUR 4.5bn (chunky given the longer maturities), as well as blocking the candidacy to the ECB position of Luxembourg’s Merch (and not because he’s not a woman). Fantastic way to drum up Junker support. Si, si…Then again, whose support does Spain need, anyway? Then again, the Bank Of Spain expects loan defaults to rise further (…) and confirmed, among an increasing lingering discussion about whether the rating rules for bonds (lenient haircut treatment because of DBRS still rating Spain A low neg outlook since 08 Aug) apply to bills, too, that they do (…)(despite the fact that the DBRS rating seems long term only).(…). Ah. There’s a point here, but sooner or later DBRS is bound to get nearer to its peers (Baa3 neg, BBB- neg, BBB neg) anyway and haircuts will rise (see 11 Oct 2012 – “ Jump ” (Van Halen, 1983)
)In case of doubt, go to the source http://www.ecb.int/paym/coll/risk/ecaf/html/index.en.html#ratingscale
US cash open in line with futures and still on the slide for a quarter percentage point and about flat for NASDAQ. Non-Mfg ISM a small miss at 54.2 (fcst 54.5 after 55.1), but with limited impact. Strange split with a rising employment index, but falling activity.
Europe closing in ROff-mode, but eventually where we already were by noon. EGBs firm, but not outrageously (having been so already on Friday, despite the equity upswing). Note Schätze trading again in negative yield territory. France just so slightly slipping away…Bunds closed at 1,42% (-3), OBLs at 0,44% (-2) and BKOs -0,008% (-1,1) with UST at 1,68% (-4)Spanish 2s at 3,11% (+8), 10s at 5,73% (+9). Spanish 2-10s 263bp (+1).Italian 2s at 2,24% (+2), 10s at 4,99% (+6). Italian 2-10s 275bp (+3).Periphery soft. Credit about stable. EUR just under 1.28. Commodities treading water.
European equities still clinging to 50ds average levels: EStoxx 2510 (2520 close), as for the DAX 7260 (7327 close), CAC 3458 (3453 close), MIB 15688 (15544 close) & IBEX 7826 (7827).To complete average levels: 100d/200d for INDU 13112/12988 (through/above) and SPX 1401/1379 (above), hence not that far. NASDAQ 100d 3013 (through) and 200d 2980 (above), as Apple-challenged, closing down 3.3% on Fri at 577, but rebounding to 585 (200d 591) at EU COB.
Take-away: Nothing really mattered… Eventually. Europe correcting Friday’s excessive optimism, in line with the US, treading water ahead of the elections. Still, the Periphery remained under (controlled) pressure with Spain cornering most, if not all negative headlines today – ahead of Thursday’s auction. 10 YRS periphery backing up to (selective) symbolic levels of 5% and 5.75% (damn’ near 6%).
Outlook for tomorrow: More of the same. German Factory orders to assess the speed of the locomotive (fcst -0.5% MoM after -1.3% MoM /-4.8% YoY). Final PMIs. US elections. No US numbers.
New Issues restricted to EUR 500m long 5 YRS senior paper for SpareBanken 1 at MS +105 and EUR 750m 4 YRS FRN for Land NRW at 3mE +11. Spanish Insurer Mapfre tentatively in the market for a 3 YRS issue.
Don’t hesitate to exchange with the author. All comments, suggestions, rants are welcome.
Closing levels:10 YRS Yields: Germany 1,42% (-3); Luxembourg 1,56% (-3); Netherlands 1,69% (-1); Finland 1,71% (-1); Swaps 1,74% (-3); EU 1,80% (-3), Austria 1,93% (-2); EIB 1,97% (-3); EFSF 2,07% (-3); France 2,21% (-1); Belgium 2,41% (-1); Italy 4,99% (+6); Spain 5,73% (+9).
10 YRS Spreads: Luxembourg 14bp (unch); Netherlands 27bp (+2); Finland 29bp (+2); Swaps 32bp (unch); EU 38bp (unch); Austria 51bp (+1); EIB 55bp (unch); EFSF 65bp (unch); France 79bp (+2); Belgium 99bp (+2); Italy 357bp (+9); Spain 431bp (+12).
EUR swap curve 2-5 YRS 49bp (unch); 5-10 YRS 82bp (-1,0) 10-30 YRS 54bp (-1,0).2 YRS German BKOs closed -0,008% (-1,1) and 5 YRS OBLs 0,44% (-2).
Main +1 to 129 (0,8% wider); Financials +1 to 173 (0,6% wider); Cross +4 to 518 (0,8% wider).Stoxx Futures at 2518 / -0,9% (from 2540) with S&P minis at 1409 (-0,8% from 1420, at European close).VIX index at 18,3 after 16,6 yesterday same time.
Oil 85,2/105,9 (WTI/Brent) from 85,4/106,5 (-0,3%/-0,6%). Gold at 1683 after 1676 (+0,4%). Copper at 347 from 348 (-0,3%). CRB at EU COB 292,0 from 292,0 (unch).BDIY ticking down again to 971 from 986 (-1.5%).
EUR 1,279 from 1,284
Greek guesstimate: Greek bonds a little changed after last week’s slide with 2023s at 18% and 2042s at 15.75%.
All levels 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.
EZ: 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 ECBGE: 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: Wed IP fcst -3.5% YoY after -3.2%US: Thu Trade Balance, Claims; Fri U Michigan Conf, Wholesale Inventories, Import PXChina: Fri monthly data dump CPI, IP, Retail Sales; Sat Trade
Click link under title or below for today’s musical support:Well, if nothing really matters… Will get sentimental with Nothing Else Matters, if this goes on… Different.Music Link
Don’t hesitate to exchange with the author. All comments, suggestions, rants are welcome.