Overnight Europe-Open Levitation Returns

Tyler Durden's picture

Just when one thought the old overnight futures levitation on a surging EURUSD regime was over, and was replaced by some semblance of normalcy, here comes Europe, sending the EURUSD screeching higher by some 100 pips from a support threatening 1.3460 on no news, with absolutely nothing changed, and pushing US futures to virtually unchanged from yesterday morning wiping out the entire day's losses in 3 short hours of near-zero volume overnight trading.

On the chart below spot the moment Europe opens: apparently the mere fact of Europe opening is now fundamentally strong news.

What little news there was was decided mixed. Initially PIIGS bonds resumed sliding, but retraced following Spain's January Services PMI which printed at 47, spiking from December's 44.3, even as the Employment PMI plunged to 42.0, the lowest since January 2012. How the economy's services are faring better when there is no economy to speak of is perhaps best answered by Argentina's set of economic data metrics.

Then we got Italian Services PMI, which in turn was far worse than expected and the prior number, or 43.9, vs Exp. of 45.8 and 45.6 last, a French Services PMI which was unchanged and in line with expectations, and a German PMI just inching above expectations, from 55.3 which was also the expected print, higher to 55.7, resulting in a blended European Services PMI of 48.6, vd the 48.3 expected, or a 10 month high. Naturally, this number is unsustainable with the EURUSD this high, but that takes us back to the much discussed economic chicken or redenominated currency egg problem at the heart of the Eurozone so we won't spend more time on it.

But perhaps the most indicative number of what is really happening was the European retail sales number which too missed expectations, declining -0.8%, below the -0.5% expected, and down from a downward revised -0.1%.

In a nutshell: this is what passes for a good day in Europe. In the meantime, the political scandal scene in both Italy and Spain is unchanged, and getting worse, especially with Rajoy summarizing it all with this absolute pearl according to El Pais: Rajoy Says ‘"It’s All Untrue, Except Some of It." No seriously, he said that.

As for the getting worse part, according to a La7 poll, the block of frontrunner Bersani is now losing ground before Italy's vote in two weeks, while Hollande made demands to have an exchange-rate policy and that it was not all up to the ECB to set rates. So French socialists must see the EURUSD rate too then?

Some additional comments from sellsiders on the ongoing fiasco in Europe via Bloomberg:

BNP Paribas:

  • EUR correction in full swing as Spanish and Italian headlines adding upward pressure on euro-zone risk premium: note to clients
  • Spanish bond auction need to get decent result to ease bond market tensions
  • BNP still sees Italy’s center-left as likely winner of lower house
  • EUR correction shouldn’t surprise as much of good news already priced in; however, a broad range of investors are still underweight EUR and will be tempted to buy dips


  • Correction can continue until ECB’s meeting on Thursday although Spanish and Italian political concerns seem unlikely to be the catalyst for a real turn in trend, Kit Juckes, strategist at SocGen, writes in note
  • Too soon for bears to come out in earnest


  • Next big test for peripheral sentiment is Spanish auctions on Thursday; shift in investor mood recently may result in weaker demand for bonos, Valentin Marinov, strategist at Citigroup, writes in note
  • Downside risk for EUR/GBP could grow on renewed widening of peripheral bond yield spreads; concerns about hung Italian parliament and reform process after elections could prompt more profit-taking in periphery
  • Indications on Thursday that demand for SPGBs may be weakening, due in part to larger than expected LTRO repayments, could also push Spanish yields higher and EUR
  • EUR/GBP could drop towards 0.85 near term, though move will be viewed as tactical correction; longer term risks are still to upside


  • Berlusconi win in vote may not prompt Italy aid
  • All sides would have interests in managing possible fallout

A recap of key FX events from SocGen:

Contagion made a brief comeback in Europe yesterday as markets wonder what to make of political developments in Madrid and whether plummeting Italian markets are a sign of investors deserting local securities before the election. Unless a change of the guard takes place and puts government reforms on shaky ground, this should prove not more than a bump in the road. However the reaction has made for some pretty compelling viewing as three days have been enough to unwind virtually all of the tightening in the 2y bono/bund spread of January. Profit taking in stocks was overdue some will argue after an unbroken eight-month winning streak, especially when the last leg up was accompanied by lower volumes. A market that was technically on the cusp of being overbought last week has gone into mean reversion mode, something that has not yet fully come to fruition in EUR/G10 crosses though we have taken a first step. Does this all of a sudden turn the EUR into a sell on rallies? It is unclear down which path the allegations of corruption against Mr Rajoy will take us, but the level of spread widening was certainly persuasive enough for some to take a defensive stance. An 3-big figure move is standard procedure if retracements of last September, October and December are any guide. With fresh Spanish supply coming on Thursday, this could be the way forward until then, with 400bp an obvious key target for the 10y spread over bunds. Prior to yesterday, the 15d rolling correlation of EUR/USD with the S&P 500 was 0.79 and with the 2y bono/bund spread it stood at -0.52. The EU services PMI (final data) should not make a big difference and will only serve to reaffirm the divergences in the euro area, something that will certainly spring up during the ECB's Q&A on Thursday

In the US the only release likely to retain market participants' attention will be the Non-manufacturing ISM report.

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firstdivision's picture

So the BIS game plan is Sell USGG10 and GDBR10, whilst buying GBTPGR10 and GSPG10  Hahahaha! They're going to lose even with unlimited capital.

 While they're at it, why not sell some more EFSF bonds? http://www.tradingeconomics.com/euro-area/government-bond-yield

Feels like June 07, or Oct 08 in the USGG10.

GetZeeGold's picture



It's Groundhog day!

dexter bland's picture

Its all about stops kids. Stop leaving them in dead obvious places....

GetZeeGold's picture



Never leave your desk on a Friday without having your stop losses in place for the weekend.

DavidC's picture

What, you mean like 100 points at 13,978.4, because that's where I got stopped out.


Whiteshadowmovement's picture

I get the feeling if all of a sudden everyone stopped using stops completely algos would go totally haywire and wed get such a weird reaction that would totally destroy confidence in the market...

Thank god it wont ever happen so well never have to know!

Racer's picture

So overnight Dow up 100 on nothing! May the farce be without you

EscapeKey's picture

According to marketwatch, it's due to "optimism on home prices".

No doubt the markets will shrug it off if they're worse than expected, as it was "priced in already".

In other news, Bernanke keeps goosing the markets...

Quinvarius's picture

Why would Stolper suddenly get it right?

francis_sawyer's picture

Plus ~ I've heard that his grandmother [on his mothers side] was a blind squirrel, so he carries that gene in his DNA...

From Germany With Love's picture

Government and banking crony propagandists soon coming to any favourite websites near you:


How long until they decide to flood ZH with misinformation?

GetZeeGold's picture



They try......but CNBC is much more fertile ground.

From Germany With Love's picture

But it's not enough, that is the point. TV here in Germany is basically all pro-Euro propaganda. They don't do it outright though, they just treat euro-sceptics as if they are basket-cases in debates. Which acts as deterence for the political mainstream to agree with those, But they realize now that this isn't enough - they need to counter the 'myths' on the internet (aka sites like ZH) through their own 'agents'.

This is totally outrageous.

EscapeKey's picture

Fuck me, that article is essentially - from top to bottom - completely outrageous.


"Parliament's institutional communicators must have the ability to monitor public conversation and sentiment on the ground and in real time, to understand 'trending topics' and have the capacity to react quickly, in a targeted and relevant manner, to join in and influence the conversation, for example, by providing facts and figures to deconstructing myths."


"When it gets serious, you have to lie" --Juncker


From Germany With Love's picture

This is just one step away from dictatorship, all that it now takes is that they oppress those who dare to speak up against them. That would be the final building block.

I predict that their next year's initiative will fail but that they will not let up and simply tweak their approach based on lessons learned. And how many of you think that the US won't follow suit eventually? Raise your hands? None? I thought so. And everybody who did, please pass on a "hi!" from me to the Politbüro.

The government and their banking cronies are about to up the ante. Is ZH prepared?


EscapeKey's picture

I don't know if it's one step away from it, but it's certainly a step towards it.

I found the other day that the biggest per capita supporter of the socialist experiment of Europe is - Denmark.

I wonder if that's some sort of "punishment" for voting "incorrectly" in the 92 and 2000 EU elections.


Reptil's picture

ah the new and improved "Department of Propaganda".

if it's now not clear the EU has been transformed into a fascist state, then you've been living on Mars.

Joseph Goebbels would be proud.


DavidC's picture

Thanks for explaining that it was on the back of no news, or at least mixed news - I've been sat here wondering WTF, watching the moves this morning in the UK.



fonzannoon's picture

David they have tried so damn hard to get retail back in. They are not going to throw the game now. Just My 2 cents.

DavidC's picture

Yes, agree with you.

That's what makes me so certain that there will be a big move down, the absolute desperation of TPTB - ultimately it can't succeed because the very people they want to get back in (i.e. the consumers, supposedly still 70% of GDP) are in no position to.

It makes me laugh when upward credit figures come in that it's touted as people spending again - it's not, it's people using credit to buy things that they don't have the available cash for. Or the student debt bubble.


Whiteshadowmovement's picture

I dunno David, just my humble $0.02 of course but I thInk they dont ultimately need the money of retail investors (people sometimes advance the argument that they *need* retail as a way to unload all the stocks they bought on the way up), rather instead they just want retails confidence. They just want retail to *trust* markets so they dont get skittish with their 401ks and pensions. The rest will take care of itself in their mind. I think the Fed will do whatever it takes to achieve this, if they have to buy every last share then no problem (all the better for them, they can control every board in America that way).

Whiteshadowmovement's picture

Luckily it probably wont come to that (on a grand scale of course) because at least imho, the Bernank is totally correct- his behavioral finance experiment is working just as he expected.

If you ramp equities and slam commodities long enough, people simply cant hold out, nor do they even *want* to. The most depressing thing of all was during these mini bear markets over the past few years, Bloomberg and CNBC had a long line of perma bulls ready to trot out and explain to us that: "people just get tired of the doom and gloom"

Sadly, they were totally right. Nobody has the wherewithall to challenge the Bernanks web of maret control. Certainly not from inside the system, and certainly not from without either.

The path of least resistance by far seems to be the Bernank getting exactly what he expected

eclectic syncretist's picture

Bennie and the banksters got the bitchez qued and their QE theme song blastin' round the clock these days. 



Whiteshadowmovement's picture

Bob Doll on Bloomberg just noe: "People are just tired of cash"

Translation: buy you fucking lemmings!

fonzannoon's picture

whiteshadow i agree that it seems they don't need retail to make the market continue to go up. people have been advancing that argument for a long time now. with no volume and no retail it has done just fine. maybe it is ben buying every share. i think they need retail though because if the middle class does not get a piece of the wealth effect then all you have is a crumbling economy and a rising market. at that point the msm saying the market shows the economy is recovering completely falls apart to everyone paying attention. luckily for tptb, no one gives a shit.

i just wish they would stop talking about retail. i think that instead of begging retail to come back in, they have a 3hr segment each day called "fuck you retail!". they can have fund managers come on air and they talk about their picks while doing coke. the last hour they can dedicate to matching up the traders with hookers and they can announce the hookers are paid by raising the mutual funds fees by 10bps each quarter.

before they go to commercial they can yell at the tv "look what you are missing you dumb sheep!"

i think they would have more luck getting people in that way

Whiteshadowmovement's picture

Fonz I am speechless, that is among the top ten ideas Ive heard maybe ever.

All I would add is that the pundits would need to see who can do the most coke on each segment and throw their weight in with them...

Where do I sign, lets get it done

fonzannoon's picture

we always want what we can't have right? throw retail out. then make fun of them. they will beg to come back in. as for seeking alpha. they are some of the most brain dead, deluded people i have ever come across...many of which outperformed me last year lol.

Whiteshadowmovement's picture

Lol, yup "the road of excess leads to the palace of wisdom"

haha yea most brain dead deluded people ever, that about sums it up. I treat SA stories pretty much like Stolper Alerts. If you see a spike in a certain amount of stories pimping one sector, its time to get the hell out of dodge, next stop is dead beta valley.

eclectic syncretist's picture

I regret that I have but one up vote to give to the Fonz.

EscapeKey's picture

Fucking LOL, love it.

I would subscribe to that channel.

orangegeek's picture

The CAC40 was down over 3% yesterday.  Today it's back up over 1%.


Ben and Barry set their alarms early to get up and buy.


The one I love most is the SP500 earnings down 1% year over year, but SP500 is up over 10%.  How do they do that?

GFORCE's picture

An exuberant desperation rally should last into the 10th, before a more significant pullback.

 As far as comments go, when have markets ever displayed efficiency in fundamental pricing? They don't. Stocks have a long bias and always run on hope-fuelled rallies, ignoring underlying problems until an event shock. Markets rallied AFTER Lehman initially.

The markets are being centrally planned by the largest central banks in the world. You may dream of shorting the top in order to satisfy some narcissistic need but the real money is made long.

Who cares what the news is? Follow the trend in the strongest stocks until said event shock.


Whiteshadowmovement's picture

Sadly, this is one of the most succint and accurate posts ive seen on ZH. I think you're exactly right. I call it Bernankes great beavhioral finance experiment.


fonzannoon's picture

the only problem i have with it is that we all know it is an experiment. so it won't end in a 20% correction. it will end in oblivion, and no one will give u a heads up when.

Laser Shark's picture

apparently the mere fact of Europe opening is now fundamentally strong news

Maybe because one day it won't be allowed to open.  When this all starts obviously imploding beyond all central bank control, whether it begins in Asia, Europe, or America, they'll probably just close the markets and halt all trading.

LongSoupLine's picture

I'm sure the shit eating, clown punching, fucking ball licking regulators are all over it.

Fuck you SEC, useless fucking pieces of fucking complicit hot shit.

francis_sawyer's picture



I read your rants every day & suddenly feel.......................................BETTER! :-)

LongSoupLine's picture

Great, now chase that with some single malt and a cigar for breakfast and....#winning.

Nid's picture

The equity spike occurred immediately after yesterday's close....planners in charge.

EclecticParrot's picture

Hmm ... it seems that "stop losses" actually enable losses,  (Any argument that postmodernism is simply a continuation of modernism has been effectively squelched.)

Glancing at the chart, I can't help but re-use a term I coined in a previous post to describe what we're seeing:  Priapistic Markets.  I suppose the key question is the degree of potential pain:  will the erection simply deflate, or break off suddenly like an icicle?   (Perhaps stalagmite's a more appropriate analogy)


DavidC's picture

If you mean priapic, yes, I agree.


EclecticParrot's picture

Shouldn't your jacket be buttoned?  And that tie hanging several inches below the belt -- tsk, tsk :)

Actually, "Priapistic", which references the serious condition of priapism, a prolonged and painful erection lasting several hours, is I believe more appropriate than simply "Priapic", which simply means phallic.  My point is that the nonstop market ramps are unnatural, potentially dangerous (froma biological standpoint), and may not end well.

Now, you may return to your NY Times crossword, but sans the croissant, as your penance.

resurger's picture

strange move, the only winning move is not to play.

thismarketisrigged's picture

wow, so as i said yesterday ( not that it was a hard prediction with this rigged market) we would most likely wipe all the losses out yesterday and add some gains as well.



iamtheeggman whooooooooooooo's picture

Love this line:

"On the chart below spot the moment Europe opens: apparently the mere fact of Europe opening is now fundamentally strong news."

They should get a trophy, too.