Overnight Market: "It's All Cypriot To Me"

Tyler Durden's picture


Another session in which the market continues to be "cautiously optimistic" about Europe, but is confused about Cyprus which keeps sending the wrong signals: in the aftermath of the Diesel-Boom fiasco, the announcement that the preciously announced reopening of banks was also subsequently "retracted" and pushed back to at least Thursday, did little to soothe fears that anyone in Europe has any idea what they are doing. Additional confusion comes from the fact that the Chairman of the Bank of Cyprus moments ago submitted his resignation: recall that this is the bank that is supposed to survive, unlike its unluckier Laiki competitor which was made into a sacrificial lamb. This confusion has so far prevented the arrival of the traditional post-Europe open ramp, as the EURUSD is locked in a range below its 200 DMA and it is unclear what if anything can push it higher, despite the Yen increasingly becoming the funding currency of choice.

There have been no macro economic news out of Europe, with China setting the stage and pushing the Shanghai Composite lower once more (-1.25%) after domestic media reported that Chinese banks will start to exercise greater control on the scale of loans to property developers (China Securities Journal). Further to that, the southern Chinese province of Guangdong announced that it will be the first province to implement cooling measures announced recently by the national government including a 20% capital gains tax and higher downpayments for second home buyers. The multi-billion non-reverse repo (liquidity withdrawing) confirms that inflation pressures in China are as strong as ever, and the ongoing open-ended QEasing by the US and soon Japan, will do nothing to help this, or push Chinese stocks higher.

Durable goods orders will be the main data release today in which a rebound in aircraft orders which declined 45.7% in January should be a catalyst for the headline print, although ex-aircraft and defense there may be some disappointment. Also scheduled today are Case-Shiller home prices, consumer confidence and new home sales.

SocGen on the key catalysts in the past 24 hours:

In the end, it turned out to be a fairly routine market response to the Cyprus rescue programme in a way that has characterised more than one bailout and EU summit in the recent past: knee-jerk relief followed by despair over the clumsy agreement and statement between EU policymakers. It was Eurogroup chair Diijsselbloem's comments on the Cyprus bank bail-in being a template for the broader euro region that sent markets scrambling for safety yesterday, with rumours of an Italy downgrade sending the Eurostoxx bank index down to levels last seen four months ago and on-target key technical level of 105.00. The realisation that deposit holders could be hit in a more generic fashion in the event of further bank trouble is causing fresh investor and popular unrest which could bring further disruption to the economic recovery. This will make the outlook even more unpredictable and as Moody's stated yesterday, Cyprus remains at risk of default and this is credit negative for all euro area sovereigns. The events of the last few days will put scrutiny on the 3y LTRO repayments announced every Friday by the ECB.

If correlations between EUR/G10 and periphery debt had temporarily become irrelevant, they jumped back to meaningful levels. The sharp widening in 2y btp/bund (+7.5bp) and bono/bund (+9bp) spreads finally squeezed EUR/USD below the 200d moving average at 1.2880. Without being technically oversold, momentum could carry the pair down to 1.2680 There is no eurozone data to speak of today - French consumer confidence was reported lower at 84 - so the focus will shift to ECB member Nowotny's speech at 10:00CET, who last week iterated that he saw no near-term rate cut. For the US, a small decline in consumer confidence is expected after a terrible Michigan confidence survey and durable goods orders are forecast to have bounced back from the steep 5.2% fall last month.

The full event roundup is as usual from Deutsche's Jim Reid:

One can’t help wondering whether there was a spike in the sales of top-end super king size mattresses late yesterday afternoon in Europe as Dutch Finance Minister and Eurogroup President Dijsselbloem discussed how the Cyprus model, including allowing larger depositors to take the strain, could become a model for future bank bailouts in Europe. He suggested that in the event of banking stresses, shareholders and bondholders will be asked to contribute and, if necessary, uninsured deposit holders. In his interview with the Financial Times and Reuters, Mr Dijsselbloem said he was effectively “pushing back the risks” that sovereigns or EU authorities would be left to shoulder the burden of bank bailouts. He added that the relative market calm in recent months, coupled with the lack of market panic following the decision to force depositors to pay for the bailout of two large Cypriot banks, allowed the eurozone to go after private money more aggressively when banks failed.

The market reaction prompted a clarification statement later where Dijsselbloem said that Cyprus was a “specific case with exceptional challenges” and that bailout programmes do not have models or templates. However by then the earlier message had done the damage with equities and the Euro falling sharply. Indeed the cat has been increasingly let out of the bag over the last week concerning the potential for different ways of resolving future bank/sovereign crisis and these comments yesterday added to the risk than nothing is going to be off the table when it comes to any future issues for the banking sector.

Investors/creditors might also take the view that there seems to be increasing inconsistency about future potential rescues. Is the ESM now redundant? Will policy be made up on the run and maybe modelled on that seen in Cyprus? It’s impossible to know at this stage which isn’t helpful for big depositors or investors in various bank securities. Luckily at the moment markets have been generally calm enough that this doesn’t immediately create problems. However the price action in European banks yesterday demonstrated the fragility that still exists. Banking stocks (-2.1%) were amongst the worst performers on the Stoxx600 (-0.27%) yesterday with Spanish, Italian and French banks bearing the brunt of the selloff. The hardest hit banks included Intesa Sanpaolo (-6.2%), Banco Populare (-5.9%), SocGen (-6.0%), Credit Agricole (-5.8%), Unicredit (-5.8%) and BBVA (-3.6%). It was a similar story in credit markets, with the European senior and subordinated financials indices adding 11bp and 13bp respectively, underperforming other credit indices.

Maybe the lesson from all of this is that if you are fortunate enough to have a fair degree of money you might be better off spending it! Maybe that’s the master plan here? Boosting activity by forcing people to use their money rather than deposit it! Indeed I wonder how long it’ll be before an equity strategist suggests that this is bullish as money might now leave deposit accounts and go into equities!

On a separate but related issue, shares in Spain’s Bankia finished the day down 41% yesterday after details of its recapitalisation plan were released last Friday. To recapitalise Bankia, shares will be written down to a nominal value of EUR0.01, and EUR4.8 billion worth of preferred shares and subordinated debt will be converted into ordinary shares. The Spanish bank recap fund, FROB, will inject EUR10.7 billion in funds.

Spain’s economy minister was keen to point out yesterday that a Cyprus-style bailout could not be extrapolated to any other country (Bloomberg).

Outside of the developments in Europe, Chairman Bernanke spoke at a discussion panel at the London School of Economics yesterday while the NY Fed’s Bill Dudley spoke at the Economic Club of New York. Bernanke commented that the benefits of monetary easing in the advanced economies are not via exchange rates but instead through supporting domestic demand. Bernanke also said he was “skeptical” that interest rate differentials were the “dominant force” behind capital inflows into emerging economies. Dudley’s speech had a relatively dovish tone. His main points were that labor market improvements were slowing; and inflation remained subdued, warranting a continuation of the Fed’s “very accommodative” policy.

Turning briefly to overnight markets, Asian equities are trading with a weaker tone with losses of around half to one percent seen across most markets. The Nikkei is outperforming other regional equities (-0.4%), helped by a 0.2% slide in the yen against USD, after comments from the BoJ governor at the semi-annual parliamentary testimony on monetary policy. Kuroda said that the BoJ could seek to push down yields across the curve by purchasing longer-dated JGBs with maturities of up to 5 years. He also added that next week’s BoJ meeting will debate specific policy steps to achieve inflation targets, making full use of the BoJ’s capabilities. The Shanghai Composite (-1.6%) is again leading losses after domestic media reported that Chinese banks will start to exercise greater control on the scale of loans to property developers (China Securities Journal). Further to that, the southern Chinese province of Guangdong announced that it will be the first province to implement cooling measures announced recently by the national government including a 20% capital gains tax and higher downpayments for second home buyers.

Turning to the day ahead, French consumer confidence is the main data print in Europe. In the US, durable goods orders will be the main data release today with our economists expecting a decent print for February, in part driven by a rebound in aircraft orders which declined 45.7% in January. Also scheduled today are Case-Shiller home prices, consumer confidence and new home sales.

Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 03/26/2013 - 06:59 | 3375952 bank guy in Brussels
bank guy in Brussels's picture

What we need now is Eurogroup chief Dijsselbloem and Germany's FinMin Schäuble together in a video interview, both drunk and talking about their strategy for seizing customer deposit  funds in the upcoming Spanish crisis, when Cyprus needs a 2nd bailout etc.

That will get the market going

Tue, 03/26/2013 - 07:04 | 3375965 philipat
philipat's picture

Throw in (Up) Juncker to reinforce the view that "When it gets serious, you have to lie" and we have the perfect troika??

Tue, 03/26/2013 - 07:13 | 3375977 JackT
JackT's picture

Is there really anything to worry about? I mean, the algos couldn't possibly be programmed to compute this dumbassery. I'm surprised they haven't shorted out!

Tue, 03/26/2013 - 07:19 | 3375987 fonzannoon
fonzannoon's picture

as long as nobody tells the truth today we should be fine.

Tue, 03/26/2013 - 07:32 | 3375995 GetZeeGold
GetZeeGold's picture



Time for another edition of Foxy Knoxy.....part deux.


Roll out the bread and circuses.

Tue, 03/26/2013 - 07:52 | 3376033 toys for tits
toys for tits's picture

Here comes the boom.

The Troika Template is a gift fuck up that I couldn't have dreamed of.

Tue, 03/26/2013 - 07:06 | 3375968 Super Broccoli
Super Broccoli's picture

we all know this is a neverending story ! you can't teach a rock how to swim !

Tue, 03/26/2013 - 07:12 | 3375974 Lets Buy The Dip
Lets Buy The Dip's picture

Yes the whole system is a god damn mess. Is it not? Imagine what the elites are gunna do to our children, the mind boggles really....doesnt it. 

The market really has halted since the start of all this cypress bailout news started, and probably the catalyst for the next move down. 


1) Start of the year with all that fiscal cliff BS.

2) Then a few weeks back with the "sequester" BS

3) Then a few days ago with this BS cypres news. 

The vix keeps popping up and down like an 85 year old grandpa on viagra. haha. 

People are nervous and looking for safety no doubt. We all know the market will not move till they decide on an agreement. I bet those rich guys in cypres are pissing in their pants right now. 

Tue, 03/26/2013 - 09:21 | 3376324 Sudden Debt
Sudden Debt's picture

Give the man a break...


He just said on television he doesn't know the meaning of:






Tue, 03/26/2013 - 07:02 | 3375958 philipat
philipat's picture

Preciously announced or Previously announced re-opening of Banks??

Tue, 03/26/2013 - 07:11 | 3375973 spanish inquisition
spanish inquisition's picture

I am guessing the delay is from trying to secretly get money back into the banks that actually already been withdrawn, so they don't look like complete idiots....

Well, maybe the thing after complete idiots.

Tue, 03/26/2013 - 07:13 | 3375978 Lets Buy The Dip
Lets Buy The Dip's picture

yes you are correct, now you are starting to think like one of the elitists. Amen. 

Tue, 03/26/2013 - 07:29 | 3376000 overmedicatedun...
overmedicatedundersexed's picture

"I am guessing the delay is from trying to secretly get money back into the banks that actually already been withdrawn, so they don't look like complete idiots...."

or they get a little longer to vaporize (corzine) assets...those banks will be hollow shells and grandpa's gold coin collection was never in that vault annnnndddd it's gone.

Tue, 03/26/2013 - 07:34 | 3376006 Dieselclam
Dieselclam's picture

I would be inclined to belive they are giving Vlad the Impaler and his Russian pals time to remove their money in order to reduce the number of self inflicted beheadings and imolations that the newly resigned bank president is seeking to avoid.

Tue, 03/26/2013 - 07:39 | 3376013 overmedicatedun...
overmedicatedundersexed's picture

when you hear of bank transfers that somehow cannot be tracked and loss of millions of euro's that may take months to return, look for corzine.

Tue, 03/26/2013 - 07:13 | 3375975 digalert
digalert's picture

CNBS analyst:

the move will help restore investor confidence


Tue, 03/26/2013 - 07:42 | 3376017 GetZeeGold
GetZeeGold's picture



Everytime a Cypriot gets screwed.....an angel gets it's wings.

Tue, 03/26/2013 - 07:45 | 3376021 jerry_theking_lawler
jerry_theking_lawler's picture

well, duh! could you imagine the level of confidence there would be if you opened the banks and a run started and their was no cash??

Tue, 03/26/2013 - 07:49 | 3376027 GetZeeGold
GetZeeGold's picture



They'll certainly hold up a couple 7-11's before they open to insure they have positive cash flow.

Tue, 03/26/2013 - 07:17 | 3375986 Downtoolong
Downtoolong's picture

the Chairman of the Bank of Cyprus moments ago submitted his resignation

No doubt this was part of the weekend deal. Now the only question is, which Goldmanite will replace him. That probably depends on whether he actually has to live in the shithole which Cyprus is to become.

Tue, 03/26/2013 - 07:21 | 3375988 css1971
css1971's picture

Indeed I wonder how long it’ll be before an equity strategist suggests that this is bullish as money might now leave deposit accounts and go into equities!

Um. Wouldn't it just end up right back in a deposit account?

Or do people think that money magically vanishes when you spend it? Really is that the level we've reached?

Civilisation is doomed.

Tue, 03/26/2013 - 07:32 | 3376002 NoDebt
NoDebt's picture

Gotta love the European bank story.  Let's announce that deposits could be forfeit in the event your particular chosen bank fails.  And let's make that announcement in a region where banks are already weak and over-levered to begin with.  By necessity it sorta makes you look at anything you have at the bank (including even your monthly checking account) as an INVESTMENT as opposed to SAVINGS.  So now let's look at the potential returns on that investment: 0.00000001% (the rate on the account). 

Check, please!

I see a bright future for check cashing shops in the Eurozone.  At least with them you know when and how much you're losing.

Tue, 03/26/2013 - 08:15 | 3376098 disabledvet
disabledvet's picture

the process has seemed punitive from the start. the folks who did arms control negotiation back in the 80's will tell you...the statement and how you GIVE the statement is as important as the agreement itself. you've thrown the President of Cyprus under the bus...the last thing you want to have happen is have the folks who planned and executed that (the "eurogroup") have a news conference to announce said activity. saying it was part of "template" simply spills the beans on the whole boondoggle vis a vis Cyprus. Obviously this is part of the negotiation..."what to say and how to say it." the usual approach is a communique of some sort...no questions from the media, no signatories...just an announcement issued out by some "euro media outlet" stating what's been agreed to. "nuff said. back to work." now it really does SOUND like a circus...hard to say if it will look like one on the ground here soon. "get to work on that one too eurogroup" is all i have to say.

Tue, 03/26/2013 - 07:54 | 3376038 orangegeek
orangegeek's picture

This has been the storyline for the last two years - arguably since 2007.


Crisis that the MSM is finally forced to report, a bunch of meetings, lots of talk, markets wobble and then back to the days of "the Dow Jones closed up 40 points today".


Another day, another push up by Ben and Barry.

Tue, 03/26/2013 - 08:13 | 3376094 chasman
chasman's picture

ECB to Cyprus >>>>>> " Thanks for participating in our little Monetary war game folks", this concludes our little experimental test on Mass Financial People psycology, you can all go back to your normal lives. We'll take it from here now. Hehehehehehehe....BahhhhhhhhhBahhhhhhhh...

Hey Egor, Ya, ya think the people will catch on....Nahhhhhhhh, too greedy and dumbed down...I can not wait to try this in America.....Yea, Egor, those Sheeeeeeeeep are really dumb

Tue, 03/26/2013 - 08:14 | 3376097 MsCreant
MsCreant's picture

What if they have accountants in there looking at accounts trying to determine if the funds have been "Laundered?" Keep away from grandma's stash, confiscate the funds that they deem to be "dishonest." Then they can announce they only did the wipe out to criminals. If your funds were taken, you must be a criminal...we have the law behind us you know.

Tue, 03/26/2013 - 08:21 | 3376115 new game
new game's picture

and then i read this;


conclusion: this is the real money war

draw your own conclusion(s)...

fake pyramid schem vs newly emerging pyramid schem (because more of the same, only the timeline changes).

but, does it? what about the actual resources to sustain this growth-oil, water, soil with the right climate-or sustainable soil?

the world as we know it is trying to sustain expoential growth and is about to hit the BRIC wall...

Tue, 03/26/2013 - 08:29 | 3376132 lakecity55
lakecity55's picture

We all need to be looking ahead at some of their future schemes. With all eyes on Cyprus, one has to wonder what the other hand is doing.

Tue, 03/26/2013 - 09:24 | 3376343 dunce
dunce's picture

The front door of the banks are closed, but the Russians are moving the money out the back door, the windows, and the magic of EFT. The old Corzine maneuver. Who you gonna call, ghostbusters?

Do NOT follow this link or you will be banned from the site!