A month after the short sale ban was implemented in French and Spanish banks, we thought it important (and perhaps educational for our European politician readers) to note the performance - French banks are down 14% and Spanish banks -8%. Can we finally put to rest the idea that a speculative cabal of mean short-sellers is responsible for the market's jitteriness? Perhaps it is simply a market trying to discern reality from manipulated machinations?
European Liquidity Blow Out As Euribor-OIS, USD Libor, And ECB Deposit Usage All Soar To Yearly HighsSubmitted by Tyler Durden on 09/12/2011 09:04 -0400
There are only three charts that matter currently for a snapshot of the liquidity pulse in Europe. And unfortunately, it continues to be in V-Fib, according to the Euribor-OIS (spread between central bank and interbank borrowing or explicit riskiness in non-printing press backstopped market), the 3M USD LIBOR (or the funding need for USDs), and the ECB Deposit Facility Usage (lack of safe alternatives on where to plant bank cash). Well, the first is at 84.9bps, +2.9, the widest since March 19, 2009, the second is at 0.343, up from 0.338%, and the widest since August 18, 2010, and deposit facility usage is at €182 billion, the widest since July 2010.
Update: NO CONTAMINATION FROM EXPLOSION AT FRENCH MARCOULE NUCLEAR SITE - FRENCH POLICE: RTRS... hopefully the accuracy here is better than at Fukushima
The following story is very fluid and we are following closely. Minutes earlier shares of french EDF have come under selling pressure following broad headlines of a explosion at a French nuclear power plant. Here is what we have found so far...
Just when one thought Wall Street could not become more full retard, here comes David "Kermit" Bianco who, perfectly oblivious of the world ending one broke European country at a time, has just released the following: "S&P 500 2011 year-end target remains 1400, 12-month target raised to 1450 from 1400 12-month target raised on time value and conviction in 2012 EPS being ~$100 barring recession." Barring recession? Has this "strategist" even looked at a TV in the past three months, let alone exited the island of lunatic asylum that is Manhattan? But wait, the humor continues, although we are 100% confident this joke of a snake oil salesman will be on CNBC any minute. As a reminder, Bianco had an S&P price target of 1650 until October 6, 2008, or after the Lehman bankruptcy. He would end up being off by only well over 100%.
- Sources close to the situation said during the weekend that Moody's may cut credit ratings of major French banks including Societe Generale, BNP Paribas and Credit Agricole. However, SocGen’s CEO downplayed the news, and ECB’s Noyer said that French banks have no liquidity issues
- German economy minister Roesler didn’t rule out an orderly Greek bankruptcy. However, a German Economy Ministry spokesman said that instruments for an orderly Greek debt insolvency is not currently being readied
- UK’s ICB, in its report, recommended “ring fencing” UK banks’ retail arm, which will incur a cost of between GBP 4-7bln. However, it gave the banks till 2019 to implement those measures
It is not often that you can look at stock futures implying an open of down more than 1% and wonder why they are so optimistic. European credit can be summed up as "the horror, the horror, the horror". XOVER hit 808 or 35 wider on the day. Main is at 202, or +11. Financials are a mess - Fins Snr is 315 or +22 on the day. All are back to near their wides. SocGen stock is below 16 and DB was down almost 10% and 46% on the year. And that was the good news! Greek bonds are dropping again. Yield is largely meaningless for Greece, but it is still eye-catching to mention that Greek 1 year bonds yields more than 100% at a price of 53.5% of par. With the 10 year bonds at 45% of par, the yield inversion is almost over, and the next phase is for the market to create a rumor that Greece is going to be trading "flat" (trading with no accrued is the final step before default).
Holy Shitshow: Recordathon In French Bank, European CDS Following Atriocious Italian Bond Auction, Dexia Bail Out, Libor ExplosionSubmitted by Tyler Durden on 09/12/2011 07:19 -0400
As we speculated on Friday, Europe has opened, and it is ugly. In fact, Europe has never been closer to a bank and market holiday than it is right now. Why? Let's go down the list...
Can the NYSE Boerse merger close quicker so some of that vaunted German engineering can finally come to the NYSE Liffe and it stops breaking every 5 minutes when the market drops?
There has been a sharp increase in risk aversion with the euro and stocks internationally falling sharply due to concerns about the coming Greek default and the real risk of contagion in the Eurozone. The euro got off to a rocky start in Asia, falling to fresh six-month lows against the dollar and a 10 year low on the yen as downside momentum picked up after several key technical levels gave way recently. Gold could see weakness today due to dollar strength and the possibility of margin calls for leveraged players on the COMEX. However, bargain hunting bullion buyers are present at these price levels and gold is likely to be supported above $1,800/oz. While dollar strength would normally result in gold weakness it is very possible that both the dollar and gold could rise together in the short term. This would result in gold making sharper gains in pounds, Swiss francs, euros and other fiat currencies. France’s largest banks by market value, BNP Paribas SA, Societe Generale SA and Credit Agricole SA, may have their credit ratings cut by Moody’s Investors Service as soon as this week because of their Greek holdings. Officials in Merkel’s government are debating how to shore up German banks in the event that Greece defaults. Merkel is due to hold talks on the debt crisis with European Commission President Jose Manuel Barroso today. The risk of contagion in the Eurozone sovereign, banking and entire financial system is very real and will result in continuing safe haven demand.
A few months ago, when Zero Hedge first broke the news that the Drachma is trading at several major banks on a "when issued" basis at the client's request, it was promptly dismissed. Alas, it may be time to dismiss the dismissal, after Spiegel reports that as one of the scenarios considered for a Greek default, Germany anticipates the reintroduction of the drachma by the pathological liars at the Greek parliament. Yes: the currency that Greece was so happy to jettison 10 years ago when after the assistance of Goldman to hide its bloated debt, to much pomp and circumstance it entered the soon to be defunct Eurozone, is coming baaaaack.
After a brief push back above Friday's lows, ES is back down to the early overnight lows (-17) just in time for the opening of Europe. Early runs on ITRX Main show +10bps at 198/200bps, XOver breaking 800bps (+35bps), and SovX +23bps to 333bps - not pretty (and worse than simply catch up to late Friday's demise). Financials continue to bear the brunt but non-financials are getting dragged out now more and more.
Let us speak in praise of flexibility, and avoid the siren songs of false precision and certitude. Let us confess that the situation globally and in Europe is unprecedented and thus intrinsically unpredictable; predictions based on the past or models plucked from the ether may prove to be not just inaccurate, but disastrously misleading to all those who put store in them. A flexible outlook avoids the temptations of zealotry, which in these times often takes the form of stating what is "impossible" (i.e. near-zero probability) and what cannot possibly happen--even if it has already happened. The only realistic prediction that can be made about the next few months is that events will be unpredictable. What we see, think and believe as near-certainties now may be undermined by events and new data. The greatest assets going forward may well prove to be flexibility, adaptability, humility and openness to low probability events suddenly transpiring despite previous estimates of their relative impossibility.