Overnight Sentiment: Face(Book)ing The Selloff
And so the unthinkable has happened: the FaceBook IPO has priced (at $38 as noted yesterday) into the ugliest possible tape imaginable, combining continuing bad news for JPM, ongoing deterioration for European risk markets (nothing new here), the need for the EU Commission to deny it is working on emergency Greek exit plans (we all know what that means) a request by Spanish banks to reinstate the short selling rule (as we predicted back in February), and a #Ref!-ing circular demand by Spain that banks deposit €30 billion into a deposit-protection fund. In other words more of the same. And yet FB has to trade up... or else. Which is why at least for the time being futures are soaring, on that, as well as on the rumor that Europe may close again today at 11:30 am Eastern. However, if 13 out of 14 previous trading days are any indication, expect the the rumor to then resurface that Europe will be opening again on Monday which will wipe out all of the day's gains since who on earth will want to be long risk over a weekend in which many things in Europe can go bump in the night.
Overnight summary from BofA:
Overnight, Asian equity markets fell sharply, with the regional MSCI Asia Pacific Index sliding 2.6% after weaker-than-expected US economic data yesterday, downgrades of 16 Spanish banks and four of the Spanish regions by Moody's, and the continuing uncertainty surrounding Greece's fate in the Euro area. After a strong start to the year, the regional benchmark index now has fully erased this year's gains.
Looking at the individual markets in the region, the worst performer was the Korean Kospi, down 3.4%. The Japanese Nikkei fell 3.0%, while the Shanghai Composite lost 1.4% and the Hang Seng fell 1.3%.
European equities are set for their biggest weekly sell-off since September. In the aggregate, European equities are down 1.0%. Shares in London are underperforming, down 1.2%, while blue chips are outperforming, down only 0.2%. At home, futures have been fluctuating all morning, but currently point to a 0.4% rebound in the S&P 500 later today. That follows yesterday's 1.5% sell-off in the index.
In bondland, Treasuries are selling off modestly across the curve. After hitting an all-time low of 1.697% yesterday, the 10-year yield is trading at 1.74% today. Meanwhile, the long bond is trading 5bp higher, at 2.83%. Despite a modest rally today, Spain's 10-year yield remains elevated, at 6.17%.
The dollar is trading marginally higher, with the DXY index up 0.1%. WTI crude oil is basically flat, trading at $92.63 a barrel. Over the past several weeks, crude prices have fallen on fears that the European sovereign debt crisis will sap global demand.
Meanwhile, the yellow metal is up $16.38 an ounce, to $1,590.58.