Overnight Summary: All Must Pray For Saint Bernanke Absolution

Tyler Durden's picture

The key headline in the overnight session was that China was willing to add a token pittance to the IMF "warchest" even as it itself is struggling to find ways to stimulate its economy. Ignore that China had demands of a complete quota overhaul that would see China nearly on par with the US in voting rights, something the US, which incidentally have exactly $0.00 to the bailout effort, would agree to. The amount that warchest has increased to is now $456 billion. It was $430 billion in April just to keep things in perspective. Hardly the Deus Ex the EURUSD is trying hard to make it appear. In the meantime, a gaping hole, as large as $350 billion has opened in Spain. And that excludes the hundreds of billions that will shortly be needed by Italy. Also out of Greece we get rumors that a government may or may not be formed. As to how long said pro-bailout government will last when over half the country voted against he memorandum, that is a different question entirely. Overall, expect a quiet session with everyone praying loudly that Bernanke will launch a new LSAP program tomorrow. If the Chairman does something far less spectacular like merely expanding Twist or raising the maturity of bonds for sale from 1-3 year to 1-4 year, the market will not be happy. Lastly, the G-20 came, ordered lots of shrimp Ceviche at the best restaurants Las Ventanas and One and Only Palmilla has to offer (charge the taxpayers of course), and conquered nothing. But issued a statement that they hope things will fix themselves all over again. In short: nothing but solid reasons for the futures to be up, up, and away.

Full overnight recap from Bank of America

Market action

Overnight, Asian equity markets sold off as Spain's borrowing costs hit a Euro area record and optimism faded that the Greek election will end the sovereign debt crisis. To fully solve the Euro area crisis Euro area leaders need to go further in their steps to integrate. In our view, they need to take steps to turn the region's monetary union into a fiscal and political union as well. In addition, they need to create a common banking regulator with region wide deposit insurance. Until that day comes, investors will continue to test the region's banking sector and investors will be hesitant to fully invest in the region. Getting to that end game is a long way off. In the meantime investors should stay defensive. 

Back to the markets, the MSCI Asia Pacific index came off its one month high falling 0.2%. Looking at the individual markets, the region's worst performer was the Japanese Nikkei 0.8%. The Shanghai Composite wasn't far behind falling 0.7%. The Hang Seng finished 0.1% lower while the Korean Kospi finished flat. On the flip side, the Indian Sensex managed to rise 0.9%. 

In Europe, we might finally be seeing the relief rally we expected from the outcome of the Greek elections. In the aggregate the region's shares are up 0.5%. At home, futures are pointing to a 0.1% rise in the S&P 500 later today.

In bondland, Treasuries are trading flat except for the long bond which is bid 1bp. The 10-year yield is currently 1.57% while the long bond is trading at 2.65%. In Europe, yields on Spanish debt are declining but the 10-year yield still remains above 7%. Meanwhile, Italy's 10-year note is trading at 5.98%. 

The dollar is weakening in the currency markets with the DXY index down 0.2%. Commodity prices are mixed. WTI crude oil is down 10 cents to $83.17 a barrel while gold is up $2.98 an ounce to $1,631.05. 

Overseas data wrap-up

The sovereign debt crisis in Europe is taking its toll on German investor confidence. The German ZEW survey plunged the most in 14 years to 33.2 in June from 44.1 in the prior month. Consensus was looking for a much smaller drop to 39.0. The key takeaway here is that Germany's economy is losing momentum and is not immune from the ongoing sovereign debt crisis. 

Inflation in the UK continues to cool. In the Fall, headline inflation in the UK was running at a 5% yoy pace, today, that rate has dropped to 2.8%. Consensus was expecting May inflation to come in at 3.0% matching the prior month's yoy pace. While headline inflation fell, core inflation actually picked up 0.1pp from the prior month to 2.2% but that was still below the 2.3% yoy rate the consensus had penciled in

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Poor Grogman's picture

The end will come when the money doesn't have enough value to buy the ink to print the money....

Temporalist's picture

Ben will place his holy hands upon your brow and absolve you!  By the power of fiat you are heeeeeeeeeeeled!

SilverTree's picture




-No ink required.

CPL's picture



That strikes me as a good tshirt or bumper sticker.

halfacanuck's picture

Look, digital currency is better than gold. It's more flexible and much better for the environment. Just because we're doing digital currency wrong at the moment doesn't mean it has to be done that way forever. Bitcoin, for example, seems to do it properly: algorithmically driven money supply growth by open-source P2P software.

Disclaimer: I am in the process of becoming long Bitcoin.

Confused's picture

1) If it can be gamed by the establishment, it WILL be done wrong. Maybe not at first. But eventually.

2) Bit coin is already being gamed.

pamriallc's picture

China has the cash and the manpower. Let the good times roll.

timbo_em's picture

Some see a 456 billion firewall, some see 456 billion more reasons for inflation.

GMadScientist's picture

I prefer to think of it as a reagent in a money / anti-money annihilation process.

q99x2's picture

I'll buy one of their good looking international female college students lunch.

On a side note, the markets don't have anything to do with the economy since everyone has left the markets to be owned and operated by the banks themselves. Markets are a private banking statistic that are made public realtime. Markets still have a political function because, well, politicians are stupid.

Peter Pan's picture

If only Ben Bernanke's helicopter had an ejector seat, I am sure things could turn out OK. Unfortunately, it only has a sewage outlet for flooding us with crap.

After all this time, there must be little doubt as to the absence of any real solution coming from the European brains trust and I am looking forward to their excuses and their fate when the proverbial shit hits the fan.

chinaguy's picture

Las Ventanas is dated & it's staff is bitchy.



London54321's picture

That's all of, let me get the calculator out... $4 per person in China.




crawl's picture

It seems to be one of those days where any news is good news.
Fed easing at current market levels? In today's world, maybe.

CPL's picture

Everyone has cancer!!!  = Bullish...medical industry is psyched!  Pills and expensive treatments for all!!

traderjj57's picture

Deus Ex, Best multiplayer video game of all time :) BigCountry

GMadScientist's picture

Too broad a category.

StarCraft? TF? Quake? Counter-Strike? Halo?

No, son. You probably liked the ending of Mass Effect 3 too. ;)

CPL's picture

Assault Cube, Open source for every platform, like TF and CS except without the horrible cheat bots.

scatterbrains's picture

Hope those were Gulf shrimp with a smidge of corexit for flavor.. or did those all go to the U.S. Army? lol

GMadScientist's picture

Oh, Bennie...Pat My Hand.

Oh money, pad my home.




EverythingFubar's picture

There doesn't seem to be an easy way to advise of good posts out there, other than through comments here on ZH? So interesting good news article (not) from Max Hastings here:




mrktwtch2's picture

just waiting for the spx to hit 1352 so i can go short again..

virgilcaine's picture

Expect lots of beard stroking and quivering but not much else today and the steepling hand gesture.

otto skorzeny's picture

Last time I checked my Catholic handbook I don't think any members of the 12 Tribes qualify for sainthood. Membership does qualify you as a chickenhawk neocon or a Wall Street untouchable insider.

midgetrannyporn's picture

Burn in Hell Bernanke.


Quinvarius's picture

The Fed gave up on helping the real economy 40 years ago.  It exists only to prop up banks and government spending.

If you are waiting for the Fed to announce how many trillions they injected into the banking system last month, don't hold your breath.  Just know that they did.  That is why they are not making a peep anymore.

ghostzapper's picture

So let me get this straight:


EURUSD is barely off recent lows.

Oil is up a paltry amount from 82ish to 84ish. 

Gold is off recent lows but is not zooming up.

The dollar is backing and filling.

Yet equities are absolutely all in on QE and balance sheet expansion.  Am I missing something?

halfacanuck's picture

Equity investors are retarded?

ghostzapper's picture

Oh and the VIX is down below 18 again (I know the VIX is not the greatest tool but just sayin'). 

halfacanuck's picture

Cerviche is good tho.