Overnight Sentiment: "No Horrible News Out Of Europe Is Great News"

Tyler Durden's picture

As already noted, one piece of good news out of Europe - German GDP (ignore the huge ZEW miss) - was enough to make everyone forget the Italian bank downgrade, and that Greece is one election away from unwinding the EMU. Yet perhaps it is good to have a modest bounce from a market, which however not even Goldman says is oversold: after all the central planners need a day or two to regroup, and consider what currency to crush next to buy the global nominal stock market a few months of breathing room.

Below is a full summary of overnight festivities from BofA.

Market action: Better data offsets Greek political drama

Stronger European economic data is offsetting the ongoing political squabbling in Greece. After contracting 0.3% QoQ in Q4 2011, the Eurozone managed to follow up with a flat Q1 2012 against a consensus looking for another 0.2% decline. So, "zero" is the new positive. Italy, Spain and Portugal saw growth drop outright, France stalled at 0.0%, but Germany defied expectations posting a 0.5% QoQ increase. 

However, German business sentiment took a hit, with the ZEW survey falling to 10.8 in May from 23.4 in April, implying moderating activity going forward. Moreover, our latest Global Fund Manager Survey (May) shows that investors are scaling back growth expectations: just 15% expect stronger growth over the next 12 months, down from 20% in April. And, 60% of investors are now expecting the ECB to engage in a more direct / large-scale QE before 2012 year-end. 

Asian stocks were down 0.5% overnight, falling for a fifth day on the Greek political impasse - and, in China, April FDI moderated to 0.74% YoY, below consensus of +2.8%. However, European equity markets are rallying on the "less-bad" economic news, up 0.6% in the aggregate. In the US, futures are pointing to a stronger open across the major indices ahead of this morning's retail sales report, which could be significant. 

As risk appetite makes a comeback, bonds are selling off. The 10-year Treasury note yield is rising 4bps, to 1.81%. Across Europe, German bunds are selling off 4bps, too, at 1.50%. In the periphery, 10-year notes are managing to stay flat. In the FX market, the euro is staging a modest rally against the dollar, up to 1.29 from yesterday's close of 1.28. Commodities are not confirming the rally in equities. Copper continues its slide, down 0.5%, to its lowest level since early January. WTI Crude Oil is off 10 cents, to $94.70 per barrel. 

Today's events: Taking the sails out of retail sales

The main event today is April's retail sales report. We believe warm weather boosted sales in March, leading to a payback in April. Under our forecast, core retail sales advance just 0.1% MoM, the weakest one-month gain since last December. Moreover, consumer prices will likely decline 0.1% MoM in April, bringing the YoY to 2.2%, in line with the core inflation measure. 

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Colombian Gringo's picture

The news out of europe is not all bad. Bankerster bonuses are at an all time high while the price of hookers has dropped due to increased supply. Money is not created or destroyed. If you lost, someone gained. 

ohhhhhbaaaaahhhhhhhhhmaaaaaahhhhh's picture

Ok :(



Short Memories's picture

Isn't it popcorn night tonight? (accounting for time lag, it's 9pm here)


We find out how they dodge this latest bullet since March 20th don't we? or did I miss it?

Taterboy's picture

Europe will be fine once they get some of those blue chip Facebook shares.

Joe The Plumber's picture

"Greece gets leeway from europe"

Bloomberg article

I was just a day early on the rip this week. We probably have a nice three percent move ahead of us this next couple weeks on major stock indices

CPL's picture



It's all fixed because Germany put more people on Welfare and thereby increased GDP in some nominal unproductive fashion that has nothing to do with growth.


Glad the market is looking rosy though.  No volume and all those fools buying will be trapped in the worst spot.  A bag of paper and no one to buy it or loan against it because no one is buying.




Ethics Gradient's picture

Did Greece pay their bond redemption?

CPL's picture

Nope...but they just saved a tonne of money by switching to an invisible insurance policy called "Don't care abotu the euro."

Nachdenken's picture

The latest this morning is that the Greek President Papaulias has proposed that Technocrats lead the Greek government since the newly elected parties are unable to form a coalition among themselves. 

At the meeting of the Euro Group Finance Ministers  in session right now,  Luc Frieden (Luxemburg) said the European contracts were not with the Greek Government, but with the Hellenic Republic.

Read into, beside and between the lines.  What Greek election ?  What Greek government ? Why this fuss ?  Its all been settled.


CPL's picture

Sad, silly and poorly managed dictatorships of Europe.