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Europe Squeezes Green But Safe-Havens Remain Bid

Tyler Durden's picture




 

EURUSD sold off back to retrace 50% of its post-EU Summit spike gains but thanks to a mini-ramp-fest in the last 30 mins of the European day, spiked back up nicely into the green for the day. The same was evident in Italian and Spanish sovereign bond spreads which had leaked ever so gently tighter all day until the last 30 mins where they compressed 5-7bps more - still hardly a ringing endorsement of the game-changing moment of last week (and still wide of their initial spike tights of Friday morning). European equity markets gained on average around 1% (with France and UK underperforming) - again helped by a late-day surge of risk-on-ness (which was miraculously evident in US equity markets also). Oil prices continue to surge (with Brent over EUR80 once again) and we suspect are as much a driver of correlated risk-on as anything else but perhaps most importantly - away from the squeeze fest in every other asset class - Swiss 2Y rates are pushing back lower once again back under -30bps (down around 4bps today) as it is clear that a bid remains for safe-havens (gold and silver also surging) despite the optics of improving spreads on sovereigns and a 10% rally in bank stocks (which remember will need to be 'resolved' before the ESM can step in at par).

Swiss 2Y rates have done nothing but fall since the weekend - now back at a 50% retracement from the spike of Friday and pushing back under -30bps...

 

EURUSD spiked off its 50% retracement into the EU close...

and while sovereign spreads continue to leak lower, we note that both Italy and Spain are stil wide of their initial spike tights from Friday morning...

and Brent has caught up (relatively) to WTI's excitment and is trading back over EUR80 once again...

Also interestingly, Italian and Spanish bonds have underperformed CDS quite notably in the last few days - it seems the squeeze was clearly in CDS - we would expect basis traders to step in soon at these levels and buy CDS protection against long bond positions to lock in the 90-100bps spread (which has been a big enough margin in the past)...

Charts: Bloomberg

 

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Tue, 07/03/2012 - 12:00 | 2584139 veyron
veyron's picture

Close positions, buy some gold, and enjoy "independence" day

Tue, 07/03/2012 - 12:04 | 2584161 camaro68ss
camaro68ss's picture

Im sorry, its now "dependence" day. havent you heard?

Tue, 07/03/2012 - 12:54 | 2584322 bigdumbnugly
bigdumbnugly's picture

europe squeezing green?

i knew europe was sick but i guess this confirms.

thankfully they have use of the bidet to clean things up.

Tue, 07/03/2012 - 13:12 | 2584385 falak pema
falak pema's picture

you don't understand; europe is green as the french maintain buying power of their state sector all the while pushing green projects and taxing the rich who have too much money anyway to affect consumption. So in the short term summer consumption will spurt up in Europe and government programs in green energy will create new jobs for small business. 

It is now anticipated that new solar technology in the pipeline will give us grid parity with nuclear within five years. In the meantime we invest and hope for the best. 80% of french electricity is nuclear. And it is projected that by 2025, 25% will be alt energy and nuclear will be down to 63 and hydro will be 12%. By 2030 it will be 50/50, nuclear and renewables.

The mystery technology is in the super black technology that increases solar capture two fold and in new add on tech that increase solar yield from 17% to 37%. That is awesome. Its all in the pipeline and its all going to come out awaiting the oil price hike expected after the iran war. Next thing you know we will have photon to electron capture direct and seamless. Awesome; the involutron is round the corner.

How much are you prepared to pay me if I give you the exact date. I have a direct line to Nostradamus. He liked Chardonnay thats how we met, his spirit and my own body self, over a glass of crystal bubbly stuff. 

You'll never find stuff like that in a french bidet.

Tue, 07/03/2012 - 13:14 | 2584403 bigdumbnugly
bigdumbnugly's picture

check's in the mail.  what's the date.

Tue, 07/03/2012 - 13:32 | 2584483 falak pema
falak pema's picture

I'm a mayan....so it must be...21/12/2012!

Tue, 07/03/2012 - 22:20 | 2585827 knukles
knukles's picture

LOL

You don't mind if I post apocalypse this check, do you?

Tue, 07/03/2012 - 12:08 | 2584182 The Monkey
The Monkey's picture

Safe havens remain bid because once the headlines and excitement over the latest stimulus actions are exhausted, it's a long way down.

For now, enjoy the rally!! S&P 1400 here we come.

Tue, 07/03/2012 - 12:39 | 2584286 Randall Cabot
Randall Cabot's picture

LOL

ISM for June craters yesterday and markets mostly flat but today factory orders for May beat and markets surge!

Tue, 07/03/2012 - 12:56 | 2584347 The Monkey
The Monkey's picture

ISM is just a swag, and like a lot of government data, is questionable.

The Fed said more stimulus if things worsened. The ISM report supports more stimulus and higher asset prices. The tape agrees. We're headed higher.

Tue, 07/03/2012 - 13:09 | 2584377 Randall Cabot
Randall Cabot's picture

I'm not at all sure as to how you arrived at your conclusion, looks like a lot of bizarro logic there: first the ISM is questionable, but the fed will use it, but ignore the factory order beat, to support more stimulus and the tape agrees even though the market is rising on the factory orders from two months ago but didn't on the ISM from one month ago?

Tue, 07/03/2012 - 12:01 | 2584147 hugovanderbubble
hugovanderbubble's picture

TVIX has made double bottom intraday

3.80x

and Equities still green

 

Bearish divergence for equities.

 

 

Tue, 07/03/2012 - 12:44 | 2584307 veyron
veyron's picture

looking at technicals for levered ETFs is absolutely idiotic.  You have to take into account leverage decay

Tue, 07/03/2012 - 12:05 | 2584165 pleseus
pleseus's picture

This rally ain't gonna last but a few more days.  Too many people got too bullish to quickly.  I think next week will be the correction.  S and P 500 back down to 1280.

Tue, 07/03/2012 - 12:13 | 2584199 mark7
mark7's picture

So Aliens are coming tomorrow to White House? Or was it postponed to next year?

Tue, 07/03/2012 - 12:19 | 2584217 lsbumblebee
lsbumblebee's picture

Comex gold +$25.00, so naturally the PPT pumper pulls up and sprays money on the DOW. Corporate media whores more than happy to cherry-pick May factory orders to explain everything.

Tue, 07/03/2012 - 12:24 | 2584229 walküre
walküre's picture

The funniest thing is that their media is pumping this market on hopes of more QE when the moonshoot in oil alone is making any QE completely impossible!

The hopium is strong this week.

Tue, 07/03/2012 - 12:36 | 2584274 RobotTrader
RobotTrader's picture

Bears truly got cornholed the last 3 1/2 years, waiting for the crash that never happened.

 

IWM is only $3 from making 4-year highs, yet just last Thursday King World News had at least 5 separate "gurus" making predictions of a "Total Financial Collapse".

Man, those guys must be scratching their heads in amazement.

Tue, 07/03/2012 - 12:43 | 2584305 genr8n
genr8n's picture

QE from BoE is in the air... China also, ECB rate cut, Fed being told to ease by IMF and then talk of having real talks re EZ..... so the hope is rampent.

This will be all done by Tuesday next week.

Tue, 07/03/2012 - 13:20 | 2584423 dcb
dcb's picture

I did not know today was a short day, but I am pssed in that I bought something and didn't realize I'd now be stuck. (sold it and rebought). we had the usual painting the tape in the last hour but at this level and with the hourly rsi/wilder so high it makes no sense. It really start to piss me off about the algo's. also when there is a small opening gap up, and pushing higher all day like today it is almost a give the europeans will take profie as will the asians. Plus if you look at tbt on the weekly we are right up against the top of that. since I don't think the fed is going to allow bond yeild to pop, it means having to go down before going up at this point.

also on crude, what kind of morons don't take some profits on my crued trade up 10% (ultra crued) over night.

plus if you use bollenger bands vwo is above the band, so clealty it should go down before moving higher also.

 

our capitial markets are so screwed up

 

happy holiday everyone.

Tue, 07/03/2012 - 14:39 | 2584791 Grand Supercycle
Grand Supercycle's picture

Rally Warning Confirmed...

As mentioned earlier, further equity strength and USDX weakness expected this year according to my analysis.

http://www.zerohedge.com/news/2012-12-24/market-analysis

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