Unlike the last two weeks, overnight sentiment for once can not be simply described as zombified, as there has been a decidedly negative undertone to risk, first in Asia, then in Europe, and finally in the US, accompanying the stealthy climb in the VIX which from a 13 handle a few days ago has quietly crept to 17. Will the market, finally realizing Bernanke will not say anything groundbreaking tomorrow, sell off just in time for J-Hole, or will the mysterious buying force-cum-Knight Algo reappear at one or more inflection points and push stocks to unchanged or green on the day. Find out in 9 hours. As for the key events of the past several hours, here is Bloomberg's dealbook summary of all the news that's fit to copy and paste.
- Treasuries steady, 5-yr notes underperforming on the curve after yesterday’s auction; week’s $99b in coupon sales conclude today with $29b 7-yrs, yield 1.115% in WI trading; last month drew record-low 0.954%.
- Fed’s Jackson Hole conference begins today, with Bernanke scheduled to speak at 10:00am New York time tomorrow. Analysts and strategists don’t expect Bernanke to signal imminent policy moves
- German economy minister Roesler told Die Zeit that there is no reason for him to take back an earlier comment that a possible exit of Greece from the euro region has lost its terror
- German unemployment increased for a fifth straight month in August as the European debt crisis curbed demand for exports and companies held back investment
- Italy sold EU2.5b of 5-yr notes, top end of target, at an average yield of 4.73% vs. 5.29% at previous auction; Rabobank expected lower yields, remains cautious There’s a risk future ECB sovereign debt purchases may result in “perverse incentives” and perpetuate chronic structural problems, Huw Pill, chief European economist at Goldman Sachs, writes in client note
- Socialist French President Hollande, elected in May, became the country’s most unpopular leader at just over 100 days into the job, a poll showed
- Republican VP nominee Paul Ryan portrayed Barack Obama as a shallow president who has failed to live up to his promises, in a convention speech also infused with an optimism reminiscent of Obama’s 2008 “yes we can” campaign theme
- China’s iron ore output probably fell about 10 percent in August as tumbling prices squeeze out costly producers and steelmakers switch to cheaper imports, the China Metallurgical Mining Enterprise Association said
- EUR/USD gains, rising toward 100-DMA at $1.2589. German bunds gain; Spanish and Italian 10-yr yields rise.
- Peripheral spreads widen. European stocks and U.S. equity-index futures drop. Crude declines. Credit little changed amid a dearth of new issuance, with Markit IG at 101bps, Markit HY at 545bps