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Market Snapshot: Europe Closes With Credit Decidedly Negative

Submitted by Tyler Durden on 09/27/2011 11:55 -0400

The onslaught of denials appears to have met its denouement in credit markets while equities find it harder to turn on 'real' news. The drivers of the strength from early Friday have been financials, particularly European financials, and while the rally has been persistent on both sides of the pond, the last few hours have seen a dramatic disconnect between the reality perceived by credit market participants and the machines/traders in equity markets with the former notably weaker.

The Blue line is a broad European equity index from Bloomberg and the rest of the lines on the chart are various credit indices (from XOver and Sub Financials to Main and Senior Financials). As the EFSF denials started this morning, so credit was clearly following the news. Similarly, FX market stalled with the EUR treading water for the same period after rallying above 1.36. JPY weakness appears one of the more significant drivers of risk so far and clearly it is disconnected so far (whether driving or driven by stocks?).

And of course the big news is in the precious metals' space where Silver and Gold have ripped back from their lows and are now positive from Friday's close (UPDATE, gold just slipped back negative).

Silver's epic 23.5% rally off Monday's lows is giving some back as stocks in the US wake up to the reality of European credit. In the context of risk assets, ES is close to fair and SPY is in sync with HYG, VXX, and TLT.

Charts: Bloomberg

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Tue, 09/27/2011 - 11:59 | 1715068 Id fight Gandhi

Why Do they allow rumors and lies to dominate the trading?

Im sure if the markers were down another 10% instead of being up 10% over there in 2 trading sessions they would be cracking down. But upward bias is always ok. Correct me if im wrong

Tue, 09/27/2011 - 12:01 | 1715084 SheepDog-One

Because all theyve got is a carrot and a stick.

Tue, 09/27/2011 - 12:46 | 1715281 He_Who Carried ...

They've got something else:

Germany's top judge has issued a blunt warning that no further fiscal powers may be surrendered to Europe without a new constitution and a popular referendum, vastly complicating plans to boost the EU's rescue machinery to €2 trillion (£1.7 trillion).
http://www.telegraph.co.uk/finance/financialcrisis/8790785/German-turmoi...

Tue, 09/27/2011 - 12:45 | 1715095 TruthInSunshine

German turmoil over EU bail-outs as top judge calls for referendum

Germany's top judge has issued a blunt warning that no further fiscal powers may be surrendered to Europe without a new [German] constitution and a popular referendum, vastly complicating plans to boost the EU's rescue machinery to €2 trillion (£1.7 trillion).

“The sovereignty of the German state is inviolate and anchored in perpetuity by basic law. It may not be abandoned by the legislature (even with its powers to amend the constitution). There is little leeway left for giving up core powers to the EU. If one wants to go beyond this limit — which might be politically legitimate and desirable — then Germany must give itself a new constitution. A referendum would be necessary. This cannot be done without the people.”

--Andreas Vosskuhle, Chief Justice of the German Federal Constititional Court

9/26/2011

_{^{*Sixteen judges make up the Federal Constitutional Court, Germany's highest and most important judicial body. They are selected to serve twelve-year, non-renewable terms and can only be removed from office for abuse of their position and then only by a motion of the court itself.}}

09-27 11:47: Germany's Roesler says leveraging EFSF is "off the table"

Tue, 09/27/2011 - 14:17 | 1715622 covert

the will get so very much worse, a nightmare graveyard.

http://expose2.wordpress.com

Tue, 09/27/2011 - 11:58 | 1715070 Putty

CNBC purple dress = market rally

Tue, 09/27/2011 - 13:32 | 1715413 hungarianboy

lol, I'll watch next time if they wear purple dress :-) Would be funny tho :D

Tue, 09/27/2011 - 11:58 | 1715072 LawsofPhysics

Shorts covered, check. see you friday gentlemen.

Tue, 09/27/2011 - 12:01 | 1715078 SheepDog-One

Must....increase credit.....must....pump equities....

Tue, 09/27/2011 - 12:02 | 1715088 DoChenRollingBearing

I would stay away from any investments in Europe. Thank you Tyler for keeping the steady stream of articles about the vital Eurozone. It will affect us here.

Precious metals and cash are OK! I keep FRNs in the safe, it seems prudent to have FRNs on hand in case of a quick calamity.

Tue, 09/27/2011 - 12:40 | 1715106 firstdivision

Watching stocks is boring today. They are levitating nicely. I'm sure once 3pm comes, down she will go.

Tue, 09/27/2011 - 12:11 | 1715132 NotApplicable

Well, since negative is positive, this must be bullish.

Tue, 09/27/2011 - 12:15 | 1715146 GoldbugVariation

Germany: DAX is up more than 11% from Monday's low (5086 to 5662). That is far more significant than silver's bouncing.

Stocks up, credit down, is consistent with high inflation expectations.

Tue, 09/27/2011 - 13:36 | 1715435 Belarus

This isn't any different than our markets bouncing 10% a few times during the fall of '08. The bounces are just a that--a bounce. But all rubber balls go both ways.

Tue, 09/27/2011 - 12:20 | 1715163 Belarus

participants and the machines/traders in equity markets with the former notably weaker.

This entry is all you need to know. Traders know the band; 1225 to 1100 and ping ponging that range. So as it uptakes, traders go all in with tight stops and fading the rallies with no convciton about 1200. The machines catalyze the traders to go long in this band with news that Europe is saved and all is well. This then gets the value sluts thinking it's a good time to BTFD.

And sure enough, short term this is fine. Intermediate term (like soon) these people, esepcially the value idiots, are going to be among the millions the lose everything.

I think the Buffett news of the buy-back by the way is very bearish. What's he doing? He knows Europe is going to eat shit and die and set off a cascade of banking problems. The buyback was put in place to not buy Berkshire anywhere near these prices....but 50% lower than it is today. For pete's sake, people are such suckers.

Tue, 09/27/2011 - 12:25 | 1715185 Kuri

Shit ! End of september's approaching. Lot of work to do. I have to boost the balance sheets !!! We have to be prepared for... let me check my calendar... oh dear... OCTOBER ??? No... not yet !

Tue, 09/27/2011 - 12:32 | 1715213 ArkansasAngie

The only thing this has to do with me is apparently "they" plan on spending my money on their cashflow problems.

My answer is no. Not today ... not tomorrow ... not next month.

Tue, 09/27/2011 - 12:43 | 1715267 Sock Puppet

Fuck it.

Tue, 09/27/2011 - 12:45 | 1715274 adr

So on the big down days Netflix was up and now on the big up days Netflix is down, why is that?

I mean you can't trade on actual fundamentals anymore so why would a momo stock like Netflix not follow the market. Garbage stock SodaStream has made back almost half its loss from the earnings collapse. Why anyone would buy the stock is beyond me.

But we know the stocks weren't bought becuase of business models and actual sales, just bought for a pump and dump scheme. It is amazing they can run the same scam multiple times with the same stock.

Tue, 09/27/2011 - 12:48 | 1715285 chancee

Where o' where would Benny boy be without the mystery buyer in the overnight futures?

Tue, 09/27/2011 - 12:56 | 1715303 ivars

New oil (Brent Crude 1M) price prediction 2011-2013:

http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a&sta...

Tue, 09/27/2011 - 13:33 | 1715420 hungarianboy

It's the EUR FRA/OIS. Don't you guys check that anymore??????

Market Snapshot: Europe Closes With Credit Decidedly Negative

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