CRB

Hard pressed to find anything remotely exciting today. Equities losing a little shine, but understandable given last week’s 5% rush (and 14% tightening in Credit). Bonds stuck in range. Fiscal Cliff hailing back (in yet rather timid manner, though). Waiting on Greek rescue revelations. Yawn!

"Sailing" (Bunds 1,41% -3; Spain 5,6% unch; Stoxx 2542 -0,4%; EUR 1,296 unch)

If we lacked Direction last week, this week was a strong case for “The Only Way is Up!” with Risk assets soaring. Quite a cleansing process over the last weeks: weak longs stopped out, weak shorts stopped out. Volatility crushed nevertheless.

"The Only Way Is Up" (Bunds 1,44% +12; Spain 5,60% -26; Stoxx 2552 +4,8%; EUR 1,296 +260)

Yet another light ROn close of the day, crowning a ROn of a week. Worries put aside on Greece (and Cyprus) and the Periphery (and the Fiscal Cliff). Sentiment data all for the better. Last week’s nightmare obviously obliterated. It’s not like things have really changed, though.

Fly like an Eagle – for those “Free Bird” of yesterday that made it through the night…

"Fly Like An Eagle" (Bunds 1,44% +1; Spain 5,6% -4; Stoxx 2552 +0,7%; EUR 1,296 +80)

US closing fine, Asia closing fine. PMIs a tick better than expected. Fine. Spanish auction fine. Greek bonds fine. All fine. Slight Risk On. Fine. Fine, fine, fine… All is good. Free that Bird – or Eat it! 

"Free Bird" (Bunds 1,43% +0; Spain 5,64% -6; Stoxx 2534 +0,6%; EUR 1,288 +60)

Uh…  Very uncomfortable French downgrade. Not surprising per se, but uncomfortable. Ask the EFSF… Brings back the question of “Who’s Next”? European Risk (Equities & Credit), however, oblivious and taking rising yields as a sure sign for Risk On. I’d see the risk of France (and everyone else) starting to count contingent costs.

"A Tout Le Monde" (Bunds 1,41% +6; Spain 5,79% -9; Stoxx 2509 +0,6%; EUR 1,281 unch)

European equities ripping and squeezed after Friday’s dismal close. Credit the same and, as more often than not lately, overdoing the equity move. EGBs rather muted with the Core pretty much where it stood throughout last week – with exception of Friday afternoon. Spain back on the radar. Europe still under US influence. Huge relief. From what and why exactly still needs to be seen. In the meantime: Rip & Tear!

"Rip And Tear" (Bunds 1,35% +3; Spain 5,88% +2; Stoxx 2495 +2,7%; EUR 1,281 +110)

Europe mostly boring. Several inconclusive downside tests in European equities. Static bonds, unwilling to tighten further. More US equity weakness, more downside. Way is shown by US equity dump. Periphery? What Periphery? What problem? Credit, EGBs, most commodities just watching. Dismal close.

"That's the Way (I Like It)" (Bunds 1,32% -2; Spain 5,86% -3; Stoxx 2429 -1,2%; EUR 1,27 -90)

The US crashing close yesterday was cushioned in Europe by better than expected (backward-looking) GDP figures in Germany and France. EZ in recession nevertheless. Limited fall-out, albeit lower (equity) levels tested. Periphery okay’ish, then good on better Italian GDP. Spain tag along with limited own dynamics, mainly trailing Risk assessment. EGBs difficult to move lower from here. Watching the US. Someone. Please. Show the way.

"Are You Gonna Go My Way? " (Bunds 1,34% +0; Spain 5,89% -3; Stoxx 2459% -0,6%; EUR 1,279 +50)

See-sawing – and still looking for direction. Open weaker, in line with the US close. Some exuberance ahead of the Italian auction, despite negative figures. Awakening that nothing was justifying this. Re-correction while awaiting the US take of things. With the US opening flattish plus, Europe had a light lift and started tagging along, tick for tick, stuck in a loop. Some more European gloomy news to end the day. Way Down. For the moment mostly an equity move. And cut.

As Greek discussions overnight revealed a spat between Europe and the IMF, and given yet another closing slump in the US, Risk started on a weak footing with Risk nearing Friday lows, before being ramped up by rumours, showered again and finally supported by the US opening in negative, albeit tame manner, before moving into positive territory and taking everything along. Given the noon despair, the afternoon relief seems…exuberant. Especially as the US still lead the way.

"That's The Way" (Bunds 1,34% unch; Spain 5,83% -5; Stoxx 2494% +0,8%; EUR 1,272 +1)

Rather quiet. Verdict still out, whether we’ll get a real rebound or whether the last days were already the dead cat bounce, before heading lower. Periphery on the soft side, but with restricted own dynamics and trailing general Risk sentiment. Waiting. For the US to show the way. Or something to happen.

"Show Me The Way" (Bunds 1,34% unch; Spain 5,88% +7; Stoxx 2473% -0,3%; EUR 1,271 unch)