Shuffle Rewind 05-09 Nov " Wake Up " (Rage Against The Machine, 1992)
This week in review (compared to Fri 02 Nov COB):
Click on day for related post, on title for song.
The week ending 02 Nov was, of course, cut short by Sandy and All-Saints, but left a rather surreal impression of European Risk decoupling for who knows what reason, raising the question of "Where Is My Mind" (Bunds 1,45% -9; Spain 5,64% +7; Stoxx 2540% +1,8%; EUR 1,284)
The kick-off the new week took place in a softer mood (and eventually converging back to the weak Fri 02 US close) on Monday. Soft, but eventually "Nothing Really Matters" (Bunds 1,42% -3; Spain 5,73% +9; Stoxx 2518 -0,9%; EUR 1,279). Europe correcting Friday’s excessive optimism 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– ahead of Thursday’s auction. Tuesday started flat, with the US election a good excuse not to do much. Economic figures rather sobering with final PMI readings for Germany and especially France revised lower. Factory orders dismal in Germany. No bad news out of the Periphery and otherwise meant nevertheless that Risk managed to pick up, "Elected" (Bunds 1,43% +1; Spain 5,64% -9; Stoxx 2531 +0,5%; EUR 1,281). Finally, by Wednesday morning, we already had the results of the vote, which led to a puzzling surge in risk appetite, followed by a sobering noon and a crashing afternoon, as reality of the last days’ figures kicked in and the markets started to play a mean "Pinball Wizard" (Bunds 1,38% -5; Spain 5,68% +4; Stoxx 2476 -2,2%; EUR 1,276). A mean close, too. So: US election week and change of guards in China. Obviously the first reaction on Obama’s second term was not one of a warm welcome. Add growth worries and Greece on Thursday, as well as the US Fiscal Cliff and "Bop 'Til You Drop" (Bunds 1,36% -2; Spain 5,84% +16; Stoxx 2479% +0,1%; EUR 1,275). Friday was so so so. Eventually Europe wanted a rebound, didn’t get it, sold off, panicked, sold off more – until the US open provided some relief, being at least stable until EU close. "No More" (Bunds 1,34% -2; Spain 5,81% -3; Stoxx 2481% +0,1%; EUR 1,271). US close positive, but just so, and certainly not brilliant with the S&P closing below its 200d average.
Well, after the Great Disconnect last week, next to the Great Pumpkin, and Sandy, we had Election week and suddenly the great Wake-Up Call. Fiscal Cliff was suddenly all the rage and ramped up equities (disconnect) were beaten flat by bonds.
"Wake Up" (Bunds 1,34% -11; Spain 5,81% +17; Stoxx 2481 -2,4%; EUR 1,271 -130)
Another very strong week for bonds with EGBs all the rage: Bunds -13 to 1.32%, the lowest since early August and UST -13 to 1.59%) with no particular difference between Core and Soft. Austria is on great footing after Tuesday’s 10 YRS auction at the all-time low and then driving the bond further. France remains slightly lagging, as Austria is moving away (now well below 2% in 10s) and Belgium zooming in (+17 after +20 last week) on OATs.
Swaps and Agencies trading in line.
Schatz was at 0% last week and has gone into negative territory again.
Spain whiplashing back and forth (+9, -9, -4, +16 after the auction, -3 on Friday) in lockstep with Italy (+6, -10, +1, +10, -3). Situation is similar on the short end. Italy is just a tick better, but it would be an illusion to think that both could be disconnected (in the near term). Focus is on Spain, as the situation is what it is, but Spain goes OMT, Italy might be forced, too. Italian 2-10 at 286 (+14 on the week), Spain 272 (+10). Italy totally floored at 2% in 2s.
The 5%-mark in 10s was symbolically avoided for Italy, while the 6%-mark still looks damn’ near for Spain. Spain back over 450 to Bunds on Friday noon, before ticking lower (447 after 419) with Italy looking paler at 363 (from 348).
No OMT in sight with Spain pretending to be done for the year funding-wise after Thursday’s auction , which hammered the market) and to start pre-funding. Well, that is if no gaping holes pop up here and there in contingent funding (i.e. regions).
EUR swap curve out to 9 YRS closed at historic lows on Friday. Interesting show of flight to safe haven 5 YRS with 2-5s flattening and 10-30s steepening, while 5-10 remained unchanged. 2-10 at 128 after 133.
Credit slightly overdoing Risk swings: after trading about in line with equities last week, Credit got slammed on the way down. Closed last week a couple of ticks tighter, widened by double that this week.
Some 0.9% equity correction on Monday (having gone a little overboard on Friday’s close), some +0.5% pick-up on Tuesday, especially in the afternoon, ahead of US election results and a general US squeeze. Rain fell on the election parade however and Wednesday saw a massive 2.2% slam dunk in equities with Thursday waiting for a rebound that never came. On the contrary, once on their own, US equities traded further lower with the S&P breaking its 200d averages for good at the close. Friday’s struggle was to remain pat.
VIX back to and over the 18-mark for a while (from 16.6 last week), but still far from panic levels.
Commodities rather a sideshow, although Tuesday saw some jolt in Oil. Sell-off on Wed. Not much change after last week’s 2 % correction, although Gold managed to rise back well over the 1700-line.
Oil slightly up, Copper down. CRB flat. Gold shining again and up 4% from its lows one week ago.
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 Issue market of mixed inspiration, not huge but good for a total of EUR 14.7bn in 20 deals (after EUR 5.6bn in 9 deals in the previous week): EFSF EUR 1.5bn 7 YRS tap, nice new Slovakia EUR 1.25bn 12 YRS. Spanish Mapfre good for EUR 1bn 3 YRS, Italian SNAM for EUR 750m 3 and long 7 YRS. Sanofi, Enexis, Lanxess for industrials. Carlsberg getting great response for EUR 1bn 2-trancher. Some more Nordics senior financials. CFF for EUR 1bn OFs.
Outlook: 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. US close green, but just so and about 0.5% below EU COB. Might disappoint at open.
Rest of the week looks patchy data-wise. 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.
On the week (compared to Fri 02 Nov COB):
10 YRS Yields: Germany 1,34% (-11); Luxembourg 1,49% (-10); Netherlands 1,61% (-9); Finland 1,63% (-9); Swaps 1,68% (-9); EU 1,73% (-10); Austria 1,80% (-15); EIB 1,89% (-11); EFSF 2,00% (-10); France 2,12% (-10); Belgium 2,30% (-12); Italy 4,97% (+4); Spain 5,81% (+17).
10 YRS Spreads: Luxembourg 15bp (+1); Netherlands 27bp (+2); Finland 29bp (+2); Swaps 34bp (+2); EU 39bp (+1); Austria 46bp (-4); EIB 55bp (-10); EFSF 66bp (+1); France 78bp (+1); Belgium 96bp (-1); Italy 363bp (+15); Spain 447bp (+28).
EUR swap curve 2-5 YRS 46bp (-3,0); 5-10 YRS 82bp (-1,0) 10-30 YRS 58bp (+3,0).
2 YRS German BKOs closed -0,036% (-4) and 5 YRS OBLs 0,36% (-10), on the week. with UST at 1,62% (-10)
Swiss 2-years tightening 2 bp to -0.257% from -0.235, after 2bp last week, but again underperforming Schätze and seemingly not the safe haven of choice, as in the past. Low was about -0.5% early August, compared to -0.04% for Schätze. Strange…
Main at 132 from 128 (3,1% wider); Financials at 180 after 172 (4,7% wider); Cross at 534 from 514 (3,9% wider).
Stoxx Futures at 2481 / -2,3% from 2540 with S&P minis at 1382 / -2,7% from 1420, at European COB last week.
VIX index at 18,0 after 16,6 last week.
Oil 85,7/108,0 (WTI/Brent) from 85,4/106,5 (+0,4%/+1,4%). Gold at 1734 after 1676 (+3,4%). Copper at 343 from 348 (-1,4%) . CRB closes unchanged on the week at 292,0.
BDY on the slide again for most of the week (after losing 6% during the previous week) and closing at 940 from 986 last Friday (-4.7%). Down 15% from the latest high at 1109 on 23 Oct.
Summer rebound peak had been 1162 early July (23.6% away). Lows in Feb at 647 (31% away) and Sep at 661.
EUR 1,271 after 1,284 last Friday
Greece saw some wild euphoric buying until the middle of the week, when 2023s tightened to 16.75% from 18% last Friday and 2042s to 14.5% from 15.75%. The whole lost steam fast, despite the austerity package being passed Wednesday night, and Greek bonds got slammed 125bp on Thursday to close the week at 18% and 15.5%.
The SOMEHOW.GREECE.WILL.BE.SAVED.-mantra fast losing steam. Saved somehow. How, no one knows.
All levels Friday 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