Overnight Sentiment: More Printing; More European Catch 22s

Tyler Durden's picture

Those who expected a major response following the surprising, and "preemptive" easing by the Bank of Japan which has now joined the freely CTRL-Ping club of central banks, and went to bed looking for a major pop in risk this morning will be disappointed. The reason is that with every passing day that Spain does not request a bailout, all those who bought Spanish bonds on the assumption that Spain will request a bailout look dumber and dumber (a dynamic we explained nearly two months ago). As a result, the EURUSD has been dragging ever lower, and is now playing with 1.30 support. Providing no additional clarity was Spanish deputy PM Soraya Saenz de Santamaria who said Spain will decide if and when to trigger an ECB bailout once all details have been analyzed. Well the details have been more than analyzed, and Spain has been more than happy to receive the benefits of its bailout, it has yet to trigger the cause. Ironically in a Barclays study,over 78% of investors see Spain requesting a bailout by year end (even though as we explained over the weekend Spain really has to do this ahead of its major cash drawing bond redemption schedule in October when it may well run out of cash). And so, just like the US Fiscal Ceiling, the global markets are expecting some Catchy 22 deus ex machina, where traders can get their cake and politicians can eat it too. Alas, there never is such a thing as a free lunch. And what is making the much needed outcome even less probable is that Spanish bonds this morning are actually trading tighter once again making a bailout less than likely. The Spanish zombie has left its grave and is now romping through the neighborhood unsupervised.

As for the ever more frequent central bank easings, such as that from the BOJ last night, the biggest joke is that in 2-3 months when every central bank has eased "to infinity and beyond" and has pre-committed to destroy its currency ala Chairsatan, the world will be right back where it was before the Fed's QE3 announcement! Ah, the joys of living in a circular, relativistic Keynesian world, where if everyone destroys their currency nobody destroyed their currency. Expect the market to realize this in 4-6 weeks, and to further realize that global debasement can only occur relative to other undilutable benchmarks. Such as crude. And gold.

For a run through of the other overnight events, we hand it over to DB's Jim Reid:

Taking a closer look at the overnight session Asian equity markets are mostly higher as we go to print led by strong gains in the Nikkei (+1.6%) and the Hang Seng (+1.1%). Chinese equities are up for the first time this week but the Shanghai Composite (+0.1%) is still lagging the broader moves in Asia. The S&P 500 Futures is up +0.3% as we type. Sentiment in China was perhaps helped by news that the government will push for 15 major capital market reforms during the current 5-year plan and a smaller-than-expected FDI contraction in August (-1.4% yoy v -5.8%).

On the row between Japan and China, Fitch noted that major Japanese auto and technology manufacturers may come under pressure if tensions escalate, naming Sharp and Nissan amongst companies with the highest revenue exposure. A UK Telegraph article reported that a senior advisor to the Chinese government has called for an attack on the Japanese bond market given its position as the biggest creditor of Japan ($230bn of bonds)

Turning to Europe, Spain's deputy PM yesterday said that the government will study seeking a rescue to bring down its borrowing costs if the conditions imposed are acceptable. She added that funding at current levels is “like throwing money out of the window”. Spanish 10yr yields closed at 5.84% finishing 8bp lower on the day, helped by a firm 12-month and 18-month T-bill auction. Elsewhere in Europe, the German ZEW poll of economic sentiment rose to -18.2 from -25.5 in August, breaking a run of four monthly declines, probably reflecting the actions of the ECB in recent weeks. Greece’s negotiations with the Troika are expected to drag on until Sunday according to the finance minister. IIF’s Charles Dallara said Athens should get cheaper rates on its EU130bn aid deal and at least two more years from the EU and IMF to meet its targets. But better terms could only come after  the government delivers on his commitments to fiscal reform (Reuters).

Looking at the day ahead, the focus will be on US housing data with home sales, permits and starts due. DB expects the August data on housing starts and permits, as well as existing home sales to show continued evidence of firming activity today. The BoE will also release minutes from its last meeting.

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Temporalist's picture

Sentiment towards US seems to be increasingly negative


Russsia expels USAID development agency

The Russian authorities have become increasingly suspicious of non-governmental organisations (NGOs), which it believes are using foreign funding to foment political unrest, says the BBC's Steve Rosenberg in Moscow.

Earlier this year, President Vladimir Putin alleged that protests surrounding his re-election were orchestrated by US-funded NGOs.


ThirdWorldDude's picture

Well that's a no-brainer, having in mind the "Russian opposition" continued with their protests and rallies last week, at exactly the same time as muslims around the world decided to visit US Embassies...


Perhaps this article (and the links within it) can help clear things out!

Zero Govt's picture

"Sentiment towards US seems to be increasingly negative."

well spotted Temprolist

it's not exactly what Barry OBastards pre-election world tour or Nobel Peace Prize promised... but then OBastard has never kept a promise in his pack of lies existence

fonzannoon's picture

Why 4-6 weeks? I must be living in a dream for the fed to unleash unlimited QE and for Crude to drop in response. Freakin bizarre.

Blackfox's picture

"It is a direct assault on global trade. The city of Bristol has launched its own currency, which cannot be used in Bath, never mind Berlin or Bombay.

More than 350 firms in the city have signed up, making it the UK's largest alternative to sterling.

Unlike previous schemes which have relied on paper, the Bristol Pound can be used online, even by mobile phone. "




cossack55's picture

The only thing worse than a Spanish zombie is a Greek zombie or a French zombie, or an Italian zombie, or an American zombie, or an Irish zombie, or a ....ad infinitum.
Where, oh where, are the Icelandic zombie slayers?

KickIce's picture

"Alas, there never is such a thing as a free lunch."

True, but being a central banker is damn close to it.

longonSpam's picture

Unlimited soup, salad & breadsticks at the Olive Garden but every new plate is a little smaller than the last. Gorge yourself while you can

kevinearick's picture

Capital cannot exist without the false assumptions of a middle class, and once created, like all life forms, will seek to reproduce, delay mechanisms.

as capital's digital money infrastructure becomes more unstable with each passing day, vaporizing collateral, of course the critters are pulling out their paper and driving up pm.

do you see bernanke printing physical dollars? what does velocity of physical dollars look like where you are?

CDSMonkey's picture

Those who bought Spain "2 months ago" amd sold heading into QE look even smarter - buying will be right trade again soon

MinnesotaMD's picture

Uncontrolled-P. There is obviously a cadre of entities in this country that are backing Obama and Bernacke in this assured destruction of our free markets and therefore of our free society by extension. Why can't these people see that this dog can turn and bite them? How is any of this a winner for corporate media owners and there henchmen? How is this a winner for liberal financiers? How can they be so blind to what is being destroyed by destroying America? Do they honestly think a Chinese World Order will be as fair minded as the British or American orders that preceded it? What are the Elite possibly thinking?