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Quiet Overnight Session Punctuated By Made Up Chinese, Stronger Than Expected German Data

Tyler Durden's picture




 

The overnight economic data dump started in China, where both exports and imports rose more than expected, at 14.7% and 16.8% respectively, on expectations of a 9.2% and 13% rise. The result was a trade surplus of $18.16 billion versus expectations of $16.15 billion. The only problem with the data is that as always, but especially in the past few months, it continued to be completely made up as SocGen analysts, and others, pointed out. The good data continued into the European trading session, where moments ago German Industrial Production rose 1.2% despite expectations of a -0.1% drop, up from 0.6% and the best print since March 2012. The followed yesterday's better than expected factory orders data, which also came at the best level since October. Whether this data too was made up, remains unknown, but it is clear that Germany will do everything it can to telegraph its economic contraction is not accelerating. It also means that any concerns of an imminent ECB rate cut, or a negative deposit rate, are likely overblown for the time being, as reflected in the kneejerk jump in the EURUSD higher.

Also out of Europe we got Swiss Consumer prices which extended their longest slump in four decades, decreasing by 0.6% Y/Y the same as March. UK house prices rose to the highest in three years according to Halifax, as home values increased 1.1% from March, with the average price rising to $257,200, the highest since 2010. In the Netherlands, Industrial Production declined 5.3% in March, much more than the forecast 2.1% drop, while output fell 2% from a 0.7% drop previously.

Perhaps most importantly out of Europe, the ECB's Asmussen said that the ECB is looking at ways to revive the market for asset-backed securities (ABS) to allow banks to pass some credit risk on to other investors as they try to boost their capital and liquidity buffers to meet new regulatory standards. As earlier reported in the German newspaper Die Welt, citing a central bank source, a majority of Governing Council members seemed to be in favour of the ECB buying asset-backed securities (ABS). Responding to a question about the Welt story, Asmussen said ECB work on what it could do to spur SME lending was ongoing. "We have an open mind to look at all things that we can do within our mandate and this relates to how can the market for asset-backed securities, especially backed by SME loans, be revived in Europe," he told a European Parliament committee. This explains how the ECB will engage the other world central banks at a time when everyone is going full throttle with diluting their currencies. After all Draghi made it quite clear in the latest press conference that the Euro is rather overvalued and that the ECB is considering ways to push it lower.

In US macro news there is little to note, with MBA mortgage application the key item on the docket. Those following the hedge fund lemming herd, are likely aware that the Ira Sohn hedge fund idea conference takes place today where many hedge funds to everything they can to either pitch their ideas to willing listeners, or to offload their positions which have been put up long ago.

And with that, let the no volume "market" levitation begin.

SocGen recaps the macro events from an FX perspective

It was not the most exciting of trading sessions yesterday but the gyrations in the Swiss Franc are captivating nevertheless and make us wonder whether the first break this month above 1.2300 in EUR/CHF is the breakthrough that markets have been waiting for. Rallies above 1.2300 have flattered to deceive since February and the return to the January highs above 1.2500 has proved a bridge too far on several occasions. The price action now was partly being driven by the purchase of topside option strikes (1.2300-1.2500), but it also coincided with the release of FX reserves data yesterday. April CPI data follow this morning. SNB fx currency reserves dropped in April for the first time in four months and though details over composition by currency are still missing, the bullish price action in EUR/CHF shows long CHF positions have been scaled back since the ECB cut rates last week. Key short-term levels to watch for the pair are 1.2344 and 1.2349 where a break brings 1.2400 in play. Data this morning is forecast to show that CPI 'accelerated' from -0.6% to -0.5%. The SNB have pencilled in -0.4% for Q2, unchanged from the Q1 average so the data should not have much bearing on SNB policy.

Amid the dearth of economic data, we will keep an eye on German industrial output where a positive surprise, on the heels of strong new orders data, should temper speculation of more ECB easing in the short-term and could see EUR/USD extends towards 1.3158 (100d ma). This should however not pose too many problems for the sale of approx E5bn of EUR2018 bonds. The back up in 5y yields to 0.39% yesterday puts us back in March territory but markets will not be too unnerved until we reach 0.45%. Portugal marked its successful return to the capital markets yesterday with the launch of an E3bn 2024 syndicated issue, with offers in excess of E10bn and 369 investors expressing interest. Priced at mid-swaps +400bp, non-domestic buyers picked up 86% of the issue (US investors 16%, French and Scandi accounts took 10% each).

For USD/CAD, housing starts may not be trivial and a strong print would add momentum for a push towards parity after yesterday's break below the May 1 low of 1.0052. Finally, we look for Norges Bank to keep rates unchanged. A more dovish take would embolden EUR/NOK bulls for a run at 7.70 after having averted a break below 7.55 last week.

* * *

DB's Jim Reid completes the overnight recap:

Overnight the sun shone on Dow Mountain as the index closed above 15,000 for the first time (+0.58%, S&P 500 +0.52%). Nine out of the ten major S&P 500 sectors closed higher on the day with IT (-0.24%) the only sector that lagged. Credit spreads also marched tighter with the CDX IG index closing below 70bps for the first time since November 2007. It proved to be a good day for company results with positive headlines from HSBC’s lower bad debts to Walt Disney’s after market EPS beat on theme park performances. This momentum has continued into the overnight Asian session. US data was mixed with lower jobs opening and a downbeat consumer economic outlook. However the market probably took comfort from better-than-expected German factory orders (+2.2% mom vs -0.5% expected) which have now gained for two consecutive months.

In Asia major equity benchmarks are mostly higher led by the ASX 200 (+1.0%) and the Nikkei (+0.9%) as we type. The Shanghai Composite (+0.2%) is also benefitting from the better-than-expected trade data. Indeed China’s trade surplus came in at $18.16bn in April (market consensus of $16.15bn) as exports outpaced imports. In other overnight news, the RBNZ Governor said the central bank had sold the kiwi which added downward pressure on the NZD. Asian credit spreads continue to march tighter overnight with the Japan iTraxx rallying 3bps tighter. The latest round of new issues from EM Asia are also performing well in secondary markets.

Moving on to today, the data calendar remains fairly quiet with Germany’s IP perhaps the only key release of note. In the US we have the $24bn 10yr UST auction but bottom-up stock pickers will probably be paying some attention to the 18th annual Ira Sohn Conference which kicks off at 12PM EST in New York today. The conference goes on for three days and has historically been a forum for industry heavyweights to present their top alpha ideas.

 

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Wed, 05/08/2013 - 07:12 | 3540339 Josephine29
Josephine29's picture

The data from the Netherlands was grim again.

 

The real economy

Matters here are much more grim than the financial markets would have you believe and they have seen more disappointing news today.

The average daily production realised by Dutch manufacturing industry was 5.3 percent down in March 2013 from March 2012. The decline was much more substantial than in February, when manufacturing output was 1.3 percent down from one year previously.

What is it with manufacturing in 2013 so far? It was only yesterday I was reviewing a year on year fall of 4.2% in France and now her neighbour has exceeded its fall,which makes me a little nervous about the UK numbers due tomorrow!

http://www.mindfulmoney.co.uk/wp/shaun-richards/where-do-rises-in-unempl...

 

 

 

It is a good job that the Netherlands did not have a house price boom like the Euro area colleagues she criticised.....Oh hang on!

 

Wed, 05/08/2013 - 07:26 | 3540356 GetZeeGold
GetZeeGold's picture

 

 

Alas Zebulon.

Wed, 05/08/2013 - 07:58 | 3540388 ebworthen
ebworthen's picture

How about just a blanket "made up 'stronger than expected' data"?

And if you have any doubt whether this is another debt bubble or not:

"...the ECB is looking at ways to revive the market for asset-backed securities (ABS) to allow banks to pass some credit risk on to other investors."

U-F-B.

Wed, 05/08/2013 - 08:23 | 3540432 thismarketisrigged
thismarketisrigged's picture

correct me if i am wrong, but isn't today the biggest pomo day of the month?

 

market should be up triple digits just on that. not that it matters or anything

Wed, 05/08/2013 - 08:39 | 3540443 THE DORK OF CORK
THE DORK OF CORK's picture

All excess available Euro area capital rations are being pushed into the German black hole................

 

What matters is euro area production as a total.

 

Ever since 1980 or perhaps earlier euro countries outside the core have lost their primary & basic secondary industries so as to further increase the cores entrepot activities.

 

First we became a Imperial market and now we have become a sort of negative resource hinterland for their sick operations.

 

The Cyprus thingy was all about pushing real physical resources onwards and upwards..........

 

The core objective is to stop all primary resource activity in Ireland & elsewhere.

 

To give a example

The euro soviet is seeking to stop turf cutting in Ireland on spurious environmental grounds.

They are also seeking to stop smoky coal burning in rural areas !!

 

The objective is to transfer diesel used for extraction and transport of primary products towards the cores added value products such as cars and shit.

The periphery is living within a Amsterdam entrepot nightmare.

 

No more diesel for that Toyota Hilux that actually does some work in Ireland means more diesel for useless BMWs

 

http://www.youtube.com/watch?v=aMV4-7DVEj0&list=UUGun52YFO7IFFdV51fMA3HA&index=20


 

 

 

 

Wed, 05/08/2013 - 08:53 | 3540521 Tsar Pointless
Tsar Pointless's picture

At this point in time, it's safe to venture that any trumpeted "good" news is soley for the continued and never-ending placation of the masses, and is 100% contrived.

And, any "bad" news that is released, truly is worse than what is being reported.

Indeed, Goebels would be a lightweight today.

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