Overnight Sentiment: Rumors Regurgitated, Refuted

Tyler Durden's picture

The overnight session has been dead, leading to continued trading on the two regurgitated rumors appearing overnight, one coming from the FT that the EU is in "fresh" talks over a Spanish rescue plan - something which is not news, but is merely the occasional catalyst to get algos snapping up EURUSD and to keep it from sliding far below the 1.3000 barrier. This rumor has subsequently been swatted down later when Italy's undersecretary of finance, Gianfranco Polillo, in an interview in Rome, repeated what has been known to most for over two months, namely that Italy and Spain won’t request bailouts unless there a new surge in bond yields (just as we explained first thing in August), and adding that "There won’t be any nation that voluntarily, with a preemptive move, even if rationally justified, would go to an international body and say -- ‘I give up my national sovereignty." A surprising moment of lucidity and truth for a European. Naturally the reemergence of the rumor is supposed to draw attention away from the real news, which is that broke Catalonia is ever closer to bluffing its independence in exchange for a bailout, or else. The other real news is that as Confidencial reported, the Spanish government has asked Santander, Banco Bilbao Vizcaya Argentaria and CaixaBank to take 30% stake in the Spanish bad bank, something which will hardly make shareholders in these companies happy for the simple reason that no bank in Spain is "not bad" if the current rate of deposit outflows continues. Finally, a second rumor appearing late yesterday is that Greek lenders are considering a new Greek bond haircut. This too has since been refuted when German Finance Ministry spokesman Martin Kotthaus told reporters in Berlin at a regular press conference that this report is without basis. In other words, as we said, rumors refuted, leaving us with essentially no real news overnight.

For the remaining (lack of) action we go to DB's Jim Reid for the best market action summary.

Moving to the US and taking a closer look at the Philly Fed print, while the headline was ahead of estimates it remained in negative territory for the fifth consecutive month. As DB’s Joe LaVorgna notes, the biggest negative in the report was the deterioration in shipments (-21.2 vs. -11.3), which fell to the lowest level since the recession (-30.5 in April 2009). On a more positive note, overall expectations of economic conditions six months forward rose sharply (+41.2 vs. +12.5). The flash Markit PMI was unchanged at 51.5, while the Conference Board Leading Indicators fell in 0.1% for August. Initial jobless claims  or the September employment survey week declined -3k to 382k but remain near the top of this year’s range (352k to 392k). Joe’s preliminary read on September employment number is +110k with no change to the unemployment rate at 8.1%.

Data aside, it was a relatively dovish day in terms of Fedspeak. Fed’s Kocherlakota advocated an unemployment targeting approach to monetary policy, saying that he would like to see rates at zero until unemployment reached 5.5%, although on the condition that the Fed fulfils its price stability mandate. Also speaking yesterday, Fed’s Lockhart reiterated his support for further QE while the more hawkish St Louis Fed’s Bullard said that he does not favour unemployment targeting, and opposed QE3 saying that he would not want to see a re-inflation of US housing prices.

Over in Europe, PMIs surprised to the downside, increasing the debate around ECB policy rates. The Eurozone’s flash composite PMI was down 0.4 in September (45.9) and disappointed versus expectations of 46.6. Most surprising was the divergence between France and Germany. The latter’s manufacturing PMI improved month-on-month (47.3 vs 44.7) but France was down sharply (42.6 vs 46.0). As Mark Wall noted this reasserts Germany’s relative PMI strength after a brief period of weakness. The implied reading of the ‘non-core’ bloc was softer on the month too, but we have to wait until the  start of October to see the details for the likes of Italy and Spain.

In other European headlines, der Spiegel is reporting that EU leaders are considering drafting a declaration designed to fulfil the conditions set out by last week’s German constitutional court ruling. The declaration will clarify that each country’s maximum ESM liabilities cannot be exceeded without that country’s parliamentary approval, and provides assurance that governments will have access to information held by the ESM. Elsewhere the Italian economy minister reiterated there were no plans for Italy to request aid, although the government lowered their 2012 GDP growth forecast to -2.4% compared to a previous forecast of -1.2%. For the record, DB is expecting growth in Italy of -2.3% this year. Staying in Europe Chinese Premier Wen during his trip to Brussels said that the country will continue its investments in the EFSF and the Eurozone.

In terms of the day ahead, it will be relatively light in terms of data. Spain’s trade data and the UK’s budget data for August will be the main focus. German finance minister Schauble is due to speak this morning in Berlin. In the US, the Fed’s Lockhart will be speaking in Atlanta. Last but by no means least, the iPhone 5 goes on sale today. How long will we be able to hold out!!??

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govttrader's picture

buying bonds for income is for saps..trading them on the other hand...


GetZeeGold's picture



You'd have to be insane to go there. If you feel you need to...fine...just dump it fast.



fonzannoon's picture

Wow this is like the low tide dead ebb of stock markets.

trebuchet's picture

Greek parties on the other hand cannot agree to last few billion and samaras off to meet Spain, italy ireland and portugal to get "solidarity"... 


... showdown coming as Greeks paly the bluffing game once more for internal party political positioning


+ Iran pouring troups into Syria, wait for Saudi (not Israel) reaction

Go Tribe's picture

"the biggest negative in the report was the deterioration in shipments (-21.2 vs. -11.3), which fell to the lowest level since the recession (-30.5 in April 2009)."


Those damned transports just don't want to cooperate with QEi.

buzzsaw99's picture

the msm will doubtless show throngs of people queuing up for the maniacal iphone5 china-made e-baublefest spending orgy. :roll:

HelluvaEngineer's picture

I'd pay good money to see a bunch of 120lb trendies in a iPhone shopping riot.

buzzsaw99's picture

from finance.yahoo.com:

The Apple co-founder Steve Wozniak, in Brisbane, Australia, for a business forum, was among a crowd of several hundred lining up for an iPhone 5.

I just feel this impulse, like I want to be part of this big adventure, this big revolution and this advance in technology,” Mr. Wozniak, who stopped working for Apple in the late 1980s, told local television...

holy peanut coated hot fudge sundae

falak pema's picture

I'll have a portion of that hot fudge.

caimen garou's picture

intrest rates at 0% til we get 5% unemployment and I crack, we have so much to look forward to here in the USofA!

EvlTheCat's picture

Goose steps across Europe..

France and nine of Europe's most powerful countries have called for an elected European Union president and an end to Britain's veto over defence policy, in a radical blueprint for the continent's future.

As well as calling for a single, elected head of state for Europe, the bloc demanded a new defence policy, under the control of a pan-EU foreign ministry commanded by Baroness Ashton, which ''could eventually involve a European army''.

The bloc also called for a new European police force patrolling the external borders of the Schengen passport-free zone and a single European visa.



Bobbyrib's picture

Wow, I can't believe the PIIGS won't secede from the EU. They can't see that they are being setup to become colonies of the French and Germans. The push for more integration is a push for more control over countries that maintain at least some sovereignty. When the Germans are finished, the EU will control these countries.

trebuchet's picture

yeah and sad thing is its bullish for 2013

Bobbyrib's picture

Spain and Italy are playing the rest of Europe for fools. They state they may need a bailout, the EU says they will put together a package, suckers buy Italian bonds thereby lowering interest rates, then the Italians and Spanish suddenly state they don't need a bailout. The people buying these bonds are fools. If they keep this up, eventually the problem will become too big to fix and the EU collapses (which it will in time anyway).

falak pema's picture

"There won’t be any nation that voluntarily, with a preemptive move, even if rationally justified, would go to an international body and say -- ‘I give up my national sovereignty." A surprising moment of lucidity and truth for a European. 

This is the crux of the argument.

What the writer fails to say that this is a 'fait accompli' imposed by the Oligarchs of globalisation; their private hoard of money lying in electronic accounts in Caymanista land; on nation- states. In this global fight, engineered and architectured by NWO, that has led over the decade to this privatisation of private banks profits and socialisation of their debts at the expense of the taxpayer. These nation-state governments, having capitulated through past fear or through rampant cronyism to the Oligarchs, are now left with empty coffers and debt mountain paper.

Now like Jefferson Davis, Rajoy and Monti, look at their ragged armies and have to make that fatal choice of Lee at Appomattox. It's only a matter of time, the financial battle is lost.

That certain regions now declare their intention to leave the nation-state in such dire straights is just part of the crazy unwind of first world capitalism. The levers of the capitalistic world belong to the global Oligarchs who are iconised by the global Apple Inc.-Walmart-Foxconn horse and buggy show, all pulled along by US, and less and less Euro, hyperconsumerism model.

But for how long can this paper fiction continue? The nemesis of Oligarchy land lies in their own cloning of paper fabrication clownery by all CBs of this electronic HFT fist-pumped world. 

orangegeek's picture

Euro is in corrective wave 2 up.  US Dollar is opposite - corrective wave 2 down.




When the Euro starts falling hard again, markets should fall too and US Dollar should rise.