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Overnight Summary: Euro Summit Burnout

Tyler Durden's picture


Last week, Europe was the source of transitory euphoria on some inexplicable assumption that just because the continent has run out of assets, and the ECB has no choice but to expand "eligible" collateral to include, well, everything, things are fixed and it is safe to buy. Today, it is the opposite. Go figure. Call it pre-eurosummit burnout, call it profit taking on hope and prayer, call it Brian Sack packing up his trading desk (just 5 more days to go), and handing over proper capital markets functioning to a B-grade economist, or best just call it deja vu all over again.

Rom Bank of America

Market action

Markets are selling off across the globe as investors grow cautious ahead of this week's European Union (EU) summit. In addition, Greek leaders will try to renegotiate their current bailout package to ease austerity measures and boost growth in the short term. In Asia, the worst performers were the Shanghai Composite (-1.6%), the Korean Kospi (-1.2%) and the Japanese Nikkei (-0.7%). All the other regional indices we cover also finished in the red.

In Europe, equities are selling off sharply, down 1.0% in the aggregate. The region's blue chips are getting crushed, down 1.8%. At home, futures are pointing to a 0.7% lower opening for the S&P 500. That would reverse the 0.7% gain on Friday.

In bondland, Treasuries are bid across the curve as investors seek out their safety. The 10-year yield is down 5bp to 1.63% while the long bond is trading at 2.71%. In Europe, Spain's 10-year borrowing costs jumped in early trading up 20bp to 6.46%. Italian's 10-year borrowing costs are also higher, rising 10bp to 5.88%. 

Overseas data wrap-up

On June 28 and 29, European leaders will meet for the EU Heads of State summit. European leaders will discuss options for resolving the ongoing sovereign debt and banking crises plaguing the euro area. Our European team believes there will be few concrete measures to come out of this week's summit. Agreement may be found on a package to support growth in the medium term, but nothing concrete on further euro integration. The options on the table include a roadmap towards some form of federalism, debt mutualisation, banking union, banking sector recapitalisation, extension of the permanent rescue mechanism (ESM) and the growth package. To read more details about the summit see: European Macro Watch, 21 June 2012. Also take a look at today's Wall Street Journal article, "Outlook for Euro Tied To EU Summit." 

On the data front, exports from Thailand increased 7.7% yoy in May. That was ahead of consensus expectation for a modest 0.4% increase and a reversal from last month's 3.9% contraction in Exports. Auto exports were the main growth contributor, rising 83% yoy. We suspect this is largely the result of fulfilling the backlog of orders resulting from last year's floods. Recovery from the floods and the backlog of orders make it difficult to ascertain the impact from a weaker global economy. However, the effect of the latter is likely to become more apparent during 2H when the Thai economy is expected to recover fully and the backlog of orders is filled

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Mon, 06/25/2012 - 07:49 | 2557257 battle axe
battle axe's picture

SOOO the Euro summit will be the same as always, nothing will get done.....

Mon, 06/25/2012 - 08:34 | 2557337 slaughterer
slaughterer's picture

Last summer markets used to rally into EuroDelusionSummits.  Now they just crash....

Mon, 06/25/2012 - 07:51 | 2557259 Gringo Viejo
Gringo Viejo's picture

The first sentence alone, made it worth getting out of bed on a Monday.


Mon, 06/25/2012 - 07:55 | 2557265 Chief_Illiniwek
Chief_Illiniwek's picture

The lesson being presented is that consequences for poor choices can be postponed indefinitely by participating in never-ending "summits".  This is really good news for so many aspects of our current "society"...

Mon, 06/25/2012 - 08:12 | 2557307 eddiebe
eddiebe's picture

Eventually the common people will force their polititians to put the financial cart behind the horse of the producing economy where it belongs. Everything else is noise and will extend and deepen the problem. It will about take a miracle to get that job done without major pain because that is the only thing that will stir enough people to actually demand the change.

Does it hurt enough yet?

Mon, 06/25/2012 - 08:16 | 2557312 slewie the pi-rat
slewie the pi-rat's picture

the NAT0 summit will announce plans to turn spanish banks into weapons of surgically-enhanced liposuction of  unwanted ass-ettes in the defMinis' purview of the areas where people still have unsightly bulges due to wallets

Mon, 06/25/2012 - 08:20 | 2557316 insanelysane
insanelysane's picture

People can only eat so much shit before they get sick or full.

Mon, 06/25/2012 - 08:26 | 2557319 Freewheelin Franklin
Freewheelin Franklin's picture



Nigel Farage on FBN: "America, you are not to blame! ... [Barroso] is a deluded idiot."






Mon, 06/25/2012 - 08:26 | 2557327 Ghordius
Mon, 06/25/2012 - 09:47 | 2557524 Freewheelin Franklin
Freewheelin Franklin's picture

Sorry. I just got it on my news feed from UKIP this morning.

Mon, 06/25/2012 - 08:34 | 2557338 slaughterer
slaughterer's picture

I want Brian Sack back.  

Mon, 06/25/2012 - 11:57 | 2558190 covert
covert's picture

I want Liberty back.

nice pic.



Mon, 06/25/2012 - 12:19 | 2558317 Aquiloaster
Aquiloaster's picture

Can they use their pride as collateral? Oh, wait. . .that was one of the assets that vanished with the FIRST bailout.

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