09 Nov 2012 – “ No More ” (Duff McKagan’s Loaded, 2009)
Europe had wanted a rebound, tried to hold on, panicked, sold off, triggered stops – and recovered as the US, although not rebounding fast and furious, at least held the line. EGB running a little out of steam, although August levels were traded again in Bunds. Periphery eventually tracking Risk, but with no own dynamic. Need to see how things close tonight. No More.
"No More" (Bunds 1,34% -2; Spain 5,81% -3; Stoxx 2481% +0,1%; EUR 1,271)
Post European COB price action in the US on Thursday again to the downside with the S&P finally breaking the 200d average at 1380 (as already before INDU and NASDAQ), which doesn’t bode well if confirmed to end the week. Fiscal Cliff base jumping, here we go.
Very nice 30 YRS auction, which confirmed our view that USTs were mainly held back by the upcoming yesterday afternoon. 10 YRS snapped back with a vengeance.
Asia mainly closing the week in the red, although in contained manner (roughly 0.5% to 1% lower). Not much in overnight news.
Chinese numbers looking good, but who would have thought otherwise, as published during the change of guards So, just for the record: CPI +1.7% (fcst +1.9% unch), PPI -2.8% (fcst -2.7% after -3.6%), IP +9.6% (fcst +9.4% after +9.2%), Retail Sales +14.5% (fcst +14.4% after +14.2%), all YoY). Aren’t these nice ones to bid goodbye to chanting masses?
French IP a huge miss, but given Germany’s performance and the French inner wiggles, who would be surprised? IP -2.7% MoM (fcst -1% after +1.5%, rev. +1.9%). Manufacturing ranking 3.2% (fcst -1.3% after +1.8%, rev. +2.1%). YoY view is -2.5% for both. BdF Biz Sentiment surprisingly stable at 92 (fcst 90 after 92). Q4 BdF growth outlook lowered to -0.1%, which seems highly optimistic. Italian IP in line with expectations at -1.5% MoM (fcst -1.6% after +1.7%) / -4.8% YoY (fcst -4.7% after -5.2%). On non-seasonally-adjusted basis, it remains a 10.5% YoY slump. Final German CPI as expected +2.1% (EU harmonized).
European open close to home – and that’s already a performance (given the US lead), although initial early future quotes were even on the upside, in mild-only Risk Off.
EGBs one to two basis point tighter with Bunds at 1.35%, Periphery softer with Italy at 5.04% (+4) and Spain 5.86% (+2), and past the 450-mark (last hit on 26 Sep and broken to the downside on 06 Sep, when Mario unveiled the OMT officially).
UST at 1.62% 6 tighter than at EU COB, basking after the well-bid 30 YRS auction.
Credit 1.5-2% wider, weaker than stocks opening a tick lower.
Commodities about 0.5% firmer across the board with EUR unchanged at 1.275. Obviously waiting for US input.
Not too much to chew on: Austria reaffirmed by Fitch. Moody’s still seeing Grexit risks (Duh!), Spain’s rating growth-dependent (Duh!) and to finalize view on France in the coming week’s (Ah?!). EU official comments "We will discuss Greece in great detail, Spain in considerably less detail, Cyprus even less detail." Just some more of the same. Definitively nothing for Greece next week, as the Troika report remains incomplete. EUR 31.3bn aid tranche stuck. Nevertheless, it has been ascertained that Greece’s EUR 4bn+ T-bill redemption next Friday will, somehow, be dealt with (next to today’s EUR 1.6bn one). Whatever, there will be a bill sales on Tuesday, too, which the Treasury will pump up to EUR 1bn 3m and EUR 2.125bn 4-week bills. Seems chunky by the usual EUR 1-1.5bn size, but those 4-w bills will probably go directly from the banks to the National Bank of Greece, with everyone (and Mario) looking elsewhere so not to see this. It looks like return to primary surplus in two more years is eventually being haggled. Usual brinkmanship.
No auction supply today. Yesterday’s Spanish paper still bleeding by mid-morning at 3 YRS 3.80% (COB 3.78% auction 3.66%), new 5s Jan 2016 4.78% (COB 4.79%, auction 4.68%) and 2032s at 6.45% (COB 6.40%, auction 6.33%).
Next week mostly uninspiring with the usual bills supply (France, Germany, Italy, Belgium, Greece), up to EUR 3bn Dutch 10 YRS (Tue), EUR 4bn new German 5 YRS (Wed) and EUR 7.5bn 2, 3 and 5 YRS BTANs and OATs out of France (Thu). Italian bond auction on Thursday will, of course, be of interest.
German and French bills on Monday will hardly rock the markets.
Sudden bond jolt around noon CET with ALL 10 YRS 3 bp tighter (including Italy and Spain) with equities drifting lower. EFSF at all-time low of 2% / +67 to Bunds.
Pretty much Risk Off mood, after, once more, opening good to sideways. Equities off 0.75% by mid-day with S&P futures back to the lows. Credit softer by 2.5-4% with financials sold.
Bunds 1,33% (-3), OBLs 0,35% (-3), BKOs -0,041% (-1,1). UST at 1,59% (-9), an impressive tightening.
Spanish 2s at 3,15% (-1), 10s at 5,82% (-2). Spanish 2-10s 267bp (-1).
Italian 2s at 2,14% (-1), 10s at 5,00% (unch). Italian 2-10s 286bp (+1).
EUR on ROFF down to 1.272 support. Commodities pat at morning levels.
Getting some good pressure on Risk with US accounts starting the day, EStoxx down over 1.5% and S&P futures down to 1365, pushing as well the EUR below 1.27, before getting some respite. Bunds printing 1.32%, the lowest yield since 30 Aug.
Afternoon session kick-started with US Import Prices at 0.5% MoM (fcst 0.0% after +1.1%). +0.4% YoY (fcst -0.5% after rev. -0.5%). Ex +0.3% MoM. Generally, not exactly a market shaking data-set, but seems quite high. Export prices flat MoM (fcst +0.2%).
US cash open actually tamer than one could have expected (INDU down just a little, S&P and NASDAQ flattish; UST ticking back up over 1.60%). U Michigan Confidence numbers above consensus at 84.9 (fcst 82.9 after 82.6) and Wholesale Inventories rising 1.1% (fcst +0.4% after +0.5%, rev. 0.8%) then led to some stability and a rebound in Risk assets. S&P back over 1380 level and EStoxx turning back positive again. If no furious rebound, at least a temporary respite.
Equities battled hard to eventually close unchanged, as yesterday, with Credit even more from its widest levels.
Periphery eventually tracking risk, but with no real conviction nor own dynamic, be it to the downside or in the recovery. Still, Italy below 5% on paper and Spain not at 6% (yet) and not over 450 to Bunds (at close).
Note that the EUR swap curve out to 9 YRS managed to tick down to yet another historic low.
Spanish auction paper finally less painful at 3.74%, 4.75% and 6.42%, although still negative.
Bunds closed at 1,34% (-2), OBLs at 0,36% (-1) and BKOs -0,036% (-0,6) with UST at 1,62% (-6)
Spanish 2s at 3,09% (-7), 10s at 5,81% (-3). Spanish 2-10s 272bp (+4).
Italian 2s at 2,11% (-4), 10s at 4,97% (-3). Italian 2-10s 286bp (+1).
Oil getting some steam and closing a good 1% higher. Gold less ebullient, but eventually up 4% from Monday’s lows. EUR stable.
Take-away: Europe had wanted a rebound, tried to hold on, panicked, sold off, triggered stops – and recovered as the US, although not rebounding fast and furious, at least held the line. EGB running a little out of steam, although August levels were traded again in Bunds. Periphery eventually tracking risk, but with no own dynamic. Need to see how things close tonight. No More.
Outlook for Monday: Who knows… EU meeting to support Greece will most probably end with Greece being supported, should Greek politics hold up over the weekend and the budget vote. Not much of hard or interesting data on Monday, either. Spanish housing transaction will bring back the focus on that sore subject. Need to see how things close tonight..
Need to grab those charts again: European equities now seriously through 50d average levels. Need to add 100: EStoxx 2515/2420 (50d/100d), DAX 7282/6991, CAC 3459/3375, MIB 15717/14898, IBEX 7855/7376.
US: 100d/200d for INDU 13124/12993, SPX 1403/1381 and NASDAQ 3017/2983, as Apple-challenged (200d 594).
EUR: 100d 1.2635 & 200d 1.2824. Fibo retracement (of May 2011 1.494 & Jul 2012 1.204) at 1.273 (tested this morning) & 1.315. Jul 2012 to Sep rebound levels: 1.231 – 1.247 – 1.261 – 1.274 – 1.291.
New Issues provided by French CFF for EUR 1bn 10 YRS OF covered bonds at MS +74 and German Chemist Lanxess with EUR 500m 10 YRS at MS +107, next to a EUR 500m increase of an outstanding 7 YRS Joint German Länder benchmark at MS +6.
Don’t miss the Shuffle Rewind over the weekend.
10 YRS Yields: Germany 1,34% (-2); Luxembourg 1,49% (-3); Netherlands 1,61% (-1); Finland 1,63% (-2); Swaps 1,68% (-3); EU 1,73% (-3), Austria 1,80% (-4); EIB 1,89% (-3); EFSF 2,00% (-4); France 2,12% (-4); Belgium 2,30% (-3); Italy 4,97% (-3); Spain 5,81% (-3).
10 YRS Spreads: Luxembourg 15bp (-1); Netherlands 27bp (+1); Finland 29bp (+0); Swaps 34bp (-1); EU 39bp (-1); Austria 46bp (-2); EIB 55bp (-1); EFSF 66bp (-2); France 78bp (-2); Belgium 96bp (-1); Italy 363bp (-1); Spain 447bp (-1).
EUR swap curve 2-5 YRS 46bp (-1,0); 5-10 YRS 82bp (-1,0) 10-30 YRS 58bp (unch).
2 YRS German BKOs closed -0,036% (-0,6) and 5 YRS OBLs 0,36% (-1).
Main +1 to 132 (0,8% wider); Financials +5 to 180 (2,9% wider); Cross +1 to 534 (0,2% wider).
Stoxx Futures at 2481 / +0,1% (from 2479) with S&P minis at 1382 (-0,3% from 1386, at European close).
VIX index at 18,0 after 18,4 yesterday same time.
Oil 85,7/108,0 (WTI/Brent) from 84,5/106,4 (+1,5%/+1,5%). Gold at 1734 after 1723 (+0,6%). Copper at 343 from 345 (-0,6%). CRB at EU COB 292,0 from 291,0 (+0,3%).
BDIY finally rebounding, up 2.6% to 940. Down 15% from the latest high at 1109 on 23 Oct.
EUR 1,271 from 1,275
Greek guesstimate: Greek bonds having clung (and probably be traded up and squeezed over the last days) got trashed today, despite the vote, with 2023s stable at 18% and 2042s 25 better at 15.5%. Obviously, Mario’s comment that the ECB has done all it could for Greece was not expected.
All levels COB 17:30 CET
Fast-forward Macro and Events:
Looks patchy data-wise. Pretty much nothing on Monday. ZEW on Tue. EZ Industrial Production on Wednesday to get serious, as well as US Retail Sales and Biz Inventories. Preliminary European Q3 GDP figures next Thursday. US IP on Friday.
EZ: Tue ZEW Sentiment; Wed IP fsct -1.8% MoM after +0.6%; Thu 3Q GDP estimate fcst -0.2%, ECB monthly report, CPI fcst 2.5%; Fri Cars
GE: Mon Wholesale PX; Tue ZEW Current fcst +8.2 after 10, Sentiment fcst -10 after -11.5; Thu Q3 GDP fcst +0.1% after +0.3% QoQ
FR: Tue Nov Q3 unemployment; Wed CPI fcst 2.1% after 2.2%; Thu Q3 GDP fcst flat unch
Italy: Tue Nov CPI final 2.8% & Gov Debt; Thu Q3 GDP fcst -0.5% after -0.8%
Spain: Mon Nov House transactions; Tue Final CPI fcst 2.5%, Thu Q3 GDP fcst -0.3% unch
US: Mon 12 Nov Veterans Day Wed PPI fcst +0.2% MoM after +1.1% Ex +0.2% after 0%, Retail Sales fcst -0.1% after +1.1%, Ex +0.3% after +0.9%, Biz Inventories fcst +0.4% after +0.6%; Thu CPI, Empire MfG, Philly FED & Claims; Fri IP and Capacity Utilization.
China: Sat Trade
Click link under title or below for today’s musical support:
You like my pain you can't resist it / So go ahead and say it one last time / You don't believe no more... No more