Overnight Bizarro Futures Levitation Driven By Spanish Balance Sheet Deterioration

Tyler Durden's picture

A snoozer of an overnight trading session for now, with Asia rising modestly, Europe green and the now priced in futures levitation as US traders walk in. Nothing material to report, except the usual - the European leverage reality continues to deteriorate: as has been long discussed the taxpayer cost to rescue Greece keeps rising, and the latest and revised figure of the bailout is €172.6 billion, €43 billion than previously thought by some (as we have pointed out from the beginning the true cost of the bailout will hit €210 billion). We will shortly point out the total disaster that the Greek balance sheet is with 7 classes of debt outstanding post the OSI. More disturbing is the "austerity" report out of Spain, where we just learned that total public debt has hit €735 billion at the end of 2011, with regions debt at €140.1 billion, which means that public debt rose to 68.5% of GDP, from 61.2% a year prior.  As Peter Tchir says: "We are still in no one cares mode, but the exposure the core has to the periphery is growing by the day.  Germany's exposure is growing because of Target 2, and Spain and Italy are busy guaranteeing the debt of their banks. On the surface, all is calm. Below the surface it is messier than ever.  They are doing everything possible to keep that mess covered because if it rises to the surface, it will be harder to control than ever before." As a reminder, this is precisely what happened in early 2011... and early 2010. You can only keep trillions of underwater debt under the rug for so long.

A full recap of overnight activity from BofA:

Market action

Asian equity markets finished mixed overnight as some investors looked to lock in profits after the recent rally. The biggest sell off was in India where the Sensex lost 1.2%. The Korean Kospi fell 0.5% and the Hang Seng finished 0.2% lower. The Japanese Nikkei managed to finish up 0.1% to mark its sixth straight week of gains. In China, the Shanghai Composite was lifted by investors seeking to capitalize on the local markets recent sell off. Overall the index rose 1.3%.

In Europe, shares are trading a solid 0.4% higher in the aggregate. If Europe can hold on to these early gains it would mark the fourth consecutive day that European equities finished higher. The rally in Europe is being fueled by growing confidence that today's US data will come in better than expected. At home, futures are up 0.1% for the S&P 500.

In the bond markets, Treasuries continue to sell off across the curve. The 10-year Treasury yield is up 3bp to 2.31% while the long bond is also up 3bp to 3.45%. The 10-year yield is now at its highest yield since October 2011. In Europe, the UK gilt and German bund are both selling off as well.

The dollar is rallying in the currency markets. The DXY index is 0.3% higher. Commodities are trading mixed. WTI crude oil is 11 cents higher at $105.23 a barrel while gold is down $10.28 an ounce to $1,647.50.

Overseas data wrap-up

Singapore's non-oil domestic exports surged 30.5% yoy in February more than reversing the -2.4% yoy drop in the prior month. Before extrapolating February's solid number we caution that January and February's data has been distorted by the Lunar (Chinese) New Year, a floating holiday. This makes it difficult to seasonal adjust data. Looking ahead, the sovereign debt crisis in Europe as well as a weaker economic backdrop around the globe should cause global trade to soften.