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Overnight Sentiment: Nothing New Under The Iberian Sun
That economic data out of Europe was disappointing overnight should come as no surprise to anyone. That Spain is broke, and there is no money to bail it out under the existing framework (and that Germany is unwilling to come up with a new bailout scheme), should also be no surprise. And yet they somehow manage to stun the market... each and every day. Which is why overnight action has now boiled down to a simple algorithmic exercise: is there a short covering squeeze: if yes, then rip, aka Risk On. If not, then Risk Off. So far, the squeeze has not been initiated which is also to be expected, following the biggest short covering squeeze in up to two years. This too may change if repo desks decide to pull borrow as they tend to do during regular hours, to give the impression that the latest and greatest bailout plan is "working." And in other news, which is completely irrelevant, here is the actual news.
From Bank of America:
Market action
Equity markets are selling off around the world. Investors were disappointed by Fed Chairman Ben Bernanke yesterday who did not lay out a clear road map for further QE. Instead his speech focused on the risk the Euro area economy poses for the US and also the dangers of the fiscal cliff. Markets are also worried that China's central bank's decision to cut its benchmark interest rates is a sign that the economy is slowing faster than investors originally expected.
The worst performing Asian equity market was the Japanese Nikkei down 2.1% followed by the Hang Seng which fell 1.0%. The Korean Kospi slipped 0.7% while the Shanghai Composite fell 0.5%. On the flip side, the Indian Sensex managed to rise 0.4%.
In Europe, equities are down 0.7% in the aggregate. Blue chips are outperforming down only 0.3% while shares listed in London are down 0.7%. At home, S&P 500 futures are pointing to a 0.4% sell off later today. That would follow the flat close yesterday.
In bondland, Treasuries are bid as the risk on rally from the prior few days begins to fade. The 10-year yield is 9bp lower at 1.56% while the long bond is down 8bp to 2.66%. In Europe, Spain's 10-year yield is on the rise up 11bp to 6.14% while the Italian 10-year is up 7bp to 5.75%. UK gilts are bid down 12bp to 1.60% and the German bund is down 9bp to 1.28%.
Big pop in the dollar with the DXY index up 0.8%. Commodities are selling off with WTI crude oil down $2.32 a barrel to $82.50 and gold down $11 an ounce to $1,578.60.
Overseas data wrap-up
On the central bank front, yesterday the Bank of England leave its benchmark interest rate unchanged at 0.5% and its asset purchase facility, ie QE, unchanged at £325 billion. Looking ahead it is highly likely that the BoE increases its asset purchase program to counter a slowing domestic economy and headwinds posed by the Euro area. In Asia, the Bank of Korea left its benchmark interest rate unchanged at 3.25% for the 12th consecutive month while the PBoC - China's central bank - cut interest rates for the first time since December 2008. The PBoC cut both the lending and deposit rates by 25bp to 6.31% and 3.25%, respectively.
Fitch downgraded Spain's credit rating three notches to BBB yesterday, with outlook negative, due to the cost of recapitalising the country's banking sector. They estimate it will cost €60bn (€100bn in a "severe stress" scenario), in line with our base case and severe bear case- and the country will be in a recession for the rest of the year and through 2013. Our Euro area economists expect the economy to contract further in 2013 by c.0.4%, although with positive qoq growth from Q1 2013, see our current forecast. Also be sure to read our most recent report on Spain here: Spain Economic Viewpoint, 08 June 2012.
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Command & Conquer: Iberian Dawn.
Command & Conquer: UltraRed Alert
Command and Conquer: PAX GERMANICA
Remember my analogy? Probably not, then here it goes again:
Investors, Banks, US Government = Young Drug addicts
Bernanke, Treasury and the FOMC = The parents
The cycle is clear, the parents provide the funds for the youngsters to buy more drugs. Until Bernanke and the FOMC realize their mistake and as a US Senator asked him yesterday in unbeliavably clear terms STOP providing us money for drugs, let us fall so that we can react and get out, the addiction pernicious cycle will continue until the destruction of the addict.
This is a clear case of mass psychosis in action. It is at the same time fun and sad to watch, given that is is a text book psychiatric case in play.
If you doubt me read what the recovered marijuana addicts themselves say about the cycle of addiction and tell me with a straight face that this is not the same.
http://marijuana-anonymous.org/lovedoneofaddict.shtml
Until next time,
Engineer
Your analogy is good, but I junked you for equating marijuana with addiction. That sort of corporativist/Big pharma language is not allowed here.
http://drugwarfacts.org/cms/?q=node/28
Bernanke, Treasury, FOMC = Drug Dealers
US Dollar taking off this morning - puts downward presssure on equities.
Elliott wave count on US Dollar shows bullish.
http://bullandbearmash.com/chart/usd-index-daily-june-6-2012/
The markets require volatility to create profits for the marker masters. The manipulation of the media is merely a means to power the paranoia.
Stocks have a limited upside, because production is falling everywhere. Value is decreasing globally. Therefore stocks can only be moved within a band. If the bottom of the band is stretched too far, the bankers risk killing the machine.
This will continue, even with CB's buying in foreign markets to create the illusion of participation, until every trader that can be fleeced by HFT platforms leaves the market.
There are no safe markets, as HFT traders have invaded all forms of exchange. Capital and wealth are being hunted down and used to hide bank debts. Nations are actively complicit and consequently, their sovereign funds are being decimated. Next will be their national assets and gold holdings.
When no capital is freely available, the taxation programs will begin- because "Debts must be paid".
It is much easier to say no now, when assets have not been stolen, then after a revolution, and try to decide whom gets what.
can anyone explain to me how asia is down so huge but europe is barely down this am. I swear, they should never allow companies to trade all the time, and across different areas of the globe.
The extraordinary irreverance of our currently reigning Krown-Prince Klown, Mark Grant, in managing to botch a simple reference to the epic European duo of Sancho Panzo and El Don affords the optimists amongst us access to the ever-available silver-lining....at this moment of epic struggle between the forces of paper windmills and the cold hard jingle of jangling silver spurs...
like the Don before them, the Spanish people are the inheritors of a tradition of irreverance to the obstacles that confront them...there really is no follow up in history to the peoples who, when confronted by the inevitablility of be-sieged defeat to the forces of the Pax Romana, killed their wives and children and burned themselves and their cities down to ashes, in preference to submitting to the 'reality' of superior force: theirs was a somehow greater reality...
a reality never better expressed than by that great product of the Iberian soul, Miguel de Unamuno:
The Spanish people have always been mad...mad with the joy of being born to die, with the need to savour every thing, every minute of being alive, the joys, and the pains of our mortal existence...and therefore immune to the small trials of the flesh. Spain is no Greece, you can take that to the bank! Too much Teuton blood mixed in with those Berber, Basque, Celt and Iberian genes.
There will be no suicides in the public squares of Hispania, there will be no mass twitterings or phony phalanx's of "activist"-led manufactured rebellion of the OWS type of Merika-lite. The Spanish earth is too red with the blood of rebellion to suffer mockery.
...they are not a people who indulge small, personal dramas. But there may be many who will gather, together, in those public places soon, tired enough at last, to say to the politicians, bankers, and other quislings in their midst....
go now, with safe passage, for if you stay, we will be the death of you.
When the latest generation of the Spanish people throw off the shackles of their "general education" and remember the poets and warriors of their past, it will indeed be nothing new under the Spanish sun. Viva El Don Pelayo!