06 Nov 2012 – “ Elected ” (Mr Bean & Smear Campaign, 1992)Music Link
Take-away: Markets have found a good excuse to be on hold. Elections. No real US figures and a tendency to ignore European ones. No shoe dropping means upside, a little. Core EGBs rather firm nevertheless, for choice. Periphery, in absence of news, trading back and forth, so better today. EZ Q4 growth looks like stalling with a catch-up of a more lenient summer. More to come."Elected " (Bunds 1,43% +1; Spain 5,64% -9; Stoxx 2513 +0.5%; EUR 1,281)---
Not much to gain from an overall flattish US session. Some algo clowns managed to have INDU close right on the 100s average at 13112. And who says computers don’t have humour? S&P midway between 50 & 100d. NASDAQ juuuuuuuuust below 3000 (Clowns...). USTs stable on afternoon levels ahead of this week’s auctions.Asia flattish, too, from an helicopter view, although Japan & China down 0.4%, balanced by OZ slightly up and Korea up 1%.Nothing interesting at the G20.
Wow! Give me one of those “all my screens are unchanged” starting days. So everything unchanged once cash markets opened. Yesterday COB levels across the board (with the exception of Brent, up 1.4%, and, for a forensic approach, Schätze down 0.75bp to -0.015% and OBLs down 1 to 0.43%). Bunds flat at 1.42%. Equities and Credit flat. Periphery flat. EUR flat. Flat. Flat. Flat.
Rajoy on radio, stating that support would be asked for if yields were substantially higher (…), as 2012 funding is by and large done (including contingent accounts?)(…), and still needs to know, if costs would then be slashed by 200 or 400bp. So only if 10 YRS were to hit 9%???
Final Service PMI data for October showing an improvement in Spain (41.2 versus 40.2 flash) and Italy (46 vs. 44.5), but a marked deterioration in France (44.6 vs. 46.2) and a weaker German reading (48.4 vs. 49.3). Locomotive(s) running out of steam… Final EZ reading hence at 45.7 (Composite) and 46.0 (Services) after initial estimates of 45.8 and 46.2. Lowest reading since respectively June and July 2009. German Coastguards, to the rescue!
Not much of an impact, though, had actually a small jolt upwards in equities, for choice. Actually Periphery bonds getting some support and tightening in by 5 bp by mid-morning, and in reaction weighting on Bunds (+2).EZ PPI at +0.2% MoM (from +0.9%) and unchanged at 2.7% YoY.
France pledging to improve finances and to kick off a competitively boost (in 2014) by cutting Gov Spending by EUR 10bn/year, offering tax credits to lower employment costs and by increasing headline VAT to 20% (from 19.6%) and adjust intermediate levels to 5% (from 5.5%, mainly food & energy) and to 10% (from 7%, restaurants and home improvements) from 2014 on.
Final data set out of Germany with Factory Orders a huge miss, dropping 3.3% MoM sa (-4.7% YoY nsa), well below forecasts of -0.4% after -1.3%, despite being revised to -0.8%. YoY data on trend after -4.8%, revised -4.6%. Locomotive stalling.
Bond supply from Austria with EUR 1.32bn split in EUR 660m 2019 at 1.218% (last 1.33%) and EUR 660m 10 YRS at 1.888% (last 2.36%, albeit back in June). COB RAGB 2019 1.25% and 2022 1.93%. Nice one here! Lucky number, too: 10 YRS auctioned and then traded at historic low.Bills out for Greece with EUR 1.3bn 6m at 4.41% (last 4.46% ), for the EFSF EUR 1.9bn 3m at -0.029% (last -0.043%) and for Belgium EUR 1.2bn 3m at +0.004% & EUR 1.3bn 6m bills at +0.021% (last -0.003% and +0.017%).
Additional EUR 4bn German OBLs on the plate tomorrow (COB 0.435%).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
Midday picture somewhat better and a little rosier. Equities up 0.6% from close, risk 2-3 ticks tighter (-1.6%).Bunds getting a tick uplift from the Factory orders. Austria basking at historic lows and nearing Germany (+46), pushing away from France (-31). Belgium tightening in on France (+18) with OATs pretty unmoved by the government announcements. Periphery holding to some of the mid-morning gains.Bunds 1,43% (+1), OBLs 0,44% (-1), BKOs -0,014% (-0,5). UST at 1,71% (+3)Spanish 2s at 3,07% (-4), 10s at 5,69% (-4). Spanish 2-10s 262bp (-1).Italian 2s at 2,16% (-8), 10s at 4,93% (-6). Italian 2-10s 277bp (+2).Oil getting some good traction with Brent adding another small 1% to already better morning levels and WTI following (+2.6% / +1.3%). EUR just above 1.28.
No early afternoon US figures to get things moving ahead of the US cash open, which opened in line with the slightly positive biased European mood, with indices ticking up half a percentage point, clinging to that despite NY ISM figures showing a drop to 45.9 from 52.9, a level last seen in Oct last year and before that in 2009.
Europe closing in rather upbeat mood. Equities ok, Credit fine, Periphery recouping yesterday’s losses. Italy actually doing even better. Core EGBs still firm with Austria flying to join that bracket. France lagging.Bunds closed at 1,43% (+1), OBLs at 0,44% (-1) and BKOs -0,014% (-0,5) with UST at 1,69% (+1) with a 3 YRS auction later.Spanish 2s at 3,02% (-9), 10s at 5,64% (-9). Spanish 2-10s 262bp (-1).Italian 2s at 2,11% (-13), 10s at 4,89% (-10). Italian 2-10s 278bp (+3).Strong Oil. Other commodities sideways. EUR stable.
Take-away: Markets have found a good excuse to be on hold. Elections. No real US figures and a tendency to ignore European ones. No shoe dropping means upside, a little. Core EGBs rather firm nevertheless, for choice. Periphery, in absence of news, trading back and forth, so better today. EZ Q4 growth looks like stalling with a catch-up of a more lenient summer. More to come.
Outlook for tomorrow: More of the same. German IP fcst -0.7% MoM after -0.5%, but might tick lower given today’s Factory orders. Italian and Spanish IP, as well, fcst -1.6% after +1.7% and -3.5% after -3.2% MoM. Last IP YoY numbers sobering with Germany -1.4% Italy -5.2% Spain -3.1%... EC economic forecast & Merkel speaking at the European Parliament.Seems like a close call in the US. We should know (or not), if counting chads (whether hanging, swinging, tri-chads or dimpled ones) will be needed in the US. A reminder
. No major US data.
Periphery day in New Issues with Italian gas utility SNAM in a 2-tranche exercise for EUR 750m each of 3 YRS at MS +150 and Feb 2020s at MS +220 (about 75bp through Italy for both at initial levels), next to Spanish Insurer Mapfre raising EUR 1bn 3 YRS at 5.125% (MS +460s, some 140 over Spain). German SAP 2-trancher with EUR 550m 3 YRS at MS +52 and EUR 750m 7 YRS at MS +92.
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Closing levels:10 YRS Yields: Germany 1,43% (+1); Luxembourg 1,57% (+1); Netherlands 1,70% (+1); Finland 1,72% (+1); Swaps 1,76% (+2); EU 1,80% (unch), Austria 1,88% (-5); EIB 1,95% (-2); EFSF 2,07% (unch); France 2,20% (-1); Belgium 2,38% (-3); Italy 4,89% (-10); Spain 5,64% (-9).
10 YRS Spreads: Luxembourg 14bp (unch); Netherlands 27bp (unch); Finland 29bp (unch); Swaps 33bp (+1); EU 37bp (-1); Austria 45bp (-6); EIB 52bp (-3); EFSF 64bp (-1); France 77bp (-2); Belgium 95bp (-4); Italy 346bp (-11); Spain 421bp (-10).
EUR swap curve 2-5 YRS 49bp (unch); 5-10 YRS 84bp (+2,0) 10-30 YRS 54bp (unch).2 YRS German BKOs closed -0,014% (-0,5) and 5 YRS OBLs 0,44% (-1).
Main -2 to 127 (-1,6% tighter); Financials -3 to 170 (-1,7% tighter); Cross -6 to 512 (-1,2% tighter).Stoxx Futures at 2531 / +0,5% (from 2518) with S&P minis at 1419 (+0,7% from 1409, at European close).VIX index at 17,9 after 18,3 yesterday same time.
Oil 86,4/108,9 (WTI/Brent) from 85,2/105,9 (+1,4%/+2,8%). Gold at 1694 after 1683 (+0,7%). Copper at 349 from 347 (+0,6%). CRB at EU COB 292,0 from 292,0 (+0,0%).BDIY continuing its slide, down 2.5% today from 971 to 947. Now down 12.5% from the latest high at 1109 on 23 Oct.
EUR 1,281 from 1,279
Greek guesstimate: Greek bonds sharply tighter without specific reason (outside the general strike for the next 48 hours with 2023s at 17% from 18% and 2042s at 14.75% from 15.75%. EU comments that a solution shall be found rapidly are hilarious. Then again, tight market, few players. A couple of millions will lead the way.
All levels COB 17:30 CET
Fast-forward Macro and Events:Not much exciting data. 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 10 YRS on Wed and 30 YRS on Thu.
EZ: Wed Retail Sales fcst -0.1% MoM /-0.8% YoY after +0.1%/-1.3%; Thu ECBGE: 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:
Of course, we bow out to the original version by Master Alice Cooper (1972). Link
Don’t hesitate to exchange with the author. All comments, suggestions, rants are welcome.