Overnight Senitment Worsens As Europe Again "Risk Off" Source

There was a time, about 4 weeks ago, when the overnight session was assumed by default to mean lower futures just because it was "the time of Europe." Then markets took one glimpse at the ECB's balance sheets and realized it had grown by more in 6 months than the Fed's during all of QE2, and decided that the central bank will not let the continent fail, and despite how ugly the European interbank market continues to be, Europe was ironically a source of optimism, no matters how ugly the actual news. In other words, a carbon copy of January 2011. Alas, January 2011 ended, and so is the currency phase of Risk On on everything European. Which explains the shift in overnight sentiment. As Bloomberg explains, the First Word Cross Asset Dashboard shows sentiment retracing from early European session rise, with commodities, FX, equities lower after Greek debt negotiations hit snag, according to Bloomberg analyst TJ Marta. EU finance chiefs balked at private investors’ offer of 4% coupon for new Greek bonds; EU wants lower; IIF’s Charles Dallara to hold press conference at 8:30am EST; EU equity indexes lower, led by OMX -1.6%; U.S. futures moderately lower, led by S&P -0.5%; US$ outperforming on risk aversion; Commodities generally modestly to moderately lower. Finally both Portugal, and thus Spain, are once again back on the radar screen. Only this time the Greek "deleveraging" model will not apply, as Zero hedge first noted, and as MUFJ picked up on in its overnight note: "It would likely be more difficult for “Portugal to restructure its private-sector debt than for Greece,” Bank of Tokyo-Mitsubishi UFJ’s Lee Hardman says, without necessarily noting where he got the idea [9]. A higher share of Portugal’s outstanding debt is governed by English law which offers greater protection to creditors vs 90% of Greek government bonds covered by local law. Finally, Hardman says that Eurozone lacks a credible firewall to ensure contagion from eventual default in Greece. That may be the case until the ECB does some gargantuan LTRO on February 29, as those in the know already expect.