If last week was Europe's days of hope, even as the continent was again breaking, predicated by the utterly ridiculous such as a successful Bill auction, a weak Spanish Bond issue, somehow spun by the propaganda crew as good despite pricing at an utterly unsustainable interest rate, and various German confidence indicators which soared to multi-year highs, today is the bitter hangover. Where to start...
First we got French and German PMIs which were nothing short of abysmal: the France Services PMI fell to 46.4, or in fresh contraction territory from March's 50.1, a 6-month low, even as the Manufacturing PMI remained virtually unchanged at 47.3 compared to 46.7 in March. All this of course adds insult to last night's Hollade victory injury for capital markets which certainly are not happy with the forthcoming change. But if France was ugly, Germany was downright abysmal with the composite PMI back down to 50.9 from 51.6 in March, dragged down by the Manufacturing PMI which hit a 33-month low of 46.3 (from 48.4 in March)! But, but, the Ifo and Zew... The end result- Eurozone April Manufacturing PMI slumped to 46 vs 48.1 Est. while the Services PMI dropped to 47.9 vs 49.3 est, with the Employment Index sliding to 48.3 fro 49.2 in Marc - the lowest since Feb 2010. In short, the quadruple dip didn't take long. But wait there's more: the Italian Consumer Confidence number printed at 89 the lowest since the series began in 1996, falling to 89.0 from a revised 96.3. Did we say falling, we meant imploding. But wait there's more. The Bank of Spain just announced that Spanish GDP fell 0.4% in Q1, confirming that the country has entered into a recession. But wait there's more. Eurostat just reported that Euro Zone govt debt-to-GDP ratio rose to a record 87.2% in 2011 from 2010's 85.3% revised from 85.4%; there was a silver lining - the deficit narrowed to 4.1% of GDP v 6.2%, yet exchanging record debt for a modest drop in deficits is hardly equitable. But wait there's more. As of minutes ago, the Dutch Cabinet and PM has formally offered its resignation to the queen, on the backdrop of this weekend's stunning news, which in turn means that the country's AAA rating is about to be slashed as first Citi and then the rating agencies warned, confirming that the contagion has spread not only to Spain and Italy (whose banks are about to be serially halted) but the core once again.
Yet while a lot of the above is noise, the big issue is that the European growth dynamo, Germany, has now definitively stalled.
End result: total bloodbath across all bond and equity markets as follows:
- Spain 10 Years: +6.1 bps
- Italy 10 Years: +8.9 bps
- Netherlands 10 Years: +10.6 bps
- France 10 Years: +3.1 bps
- Netherlands CDS: +10 bps, at 129 and just shy of the all time wide of 136 bps. If the country is downgrade from AAA, which it will be shortly, that level will not hold.
- Italian banks are about to start being halted down with Intesa and Unicredit as usual first, even as the FTSI MIB is now down 7.5% YTD. How long until the short selling ban is reinstated?
- S&P 500 futures down 0.96% to 1362
- Stoxx 600 down 1.79% to 253.17
- US 10Yr yield down 3bps to 1.93%
- German 10Yr yield down 4bps to 1.67%
- MSCI Asia Pacific down 0.55% to 123.53
- Gold spot down 0.57% to $1633.62/oz
Needless to say, US equity futures are exhibitingn a very peculiar shade of green.
Finally, as we will show shortly, Europe's daily bond auction calendar is once again the buyside's favorite topic. And this week will be both busy and ugly.
Perhaps it is time for yet another IMF panhandling crusade, which somehow makes a failure to get the needed $600 billion in guarantees, procuring only $430billion, into a success.