Overnight Review And A Look At Today's Snoozefest

As Goldman observed last night, the "metaboring" meme continues, as things go from boringer to boringest. Nothing notable has happened overnight. Some things that did happen was news that Spain is about to receive an emergency disbursement from its €100 billion euro bank bailout because of restriction imposed by the ECB on bank borrowings; Italian banks announced plans to dispose of more bad loans to avoid "potentially bigger losses" (to whom? the ECB?), non-voting Fed member Kocherlakota saying that cutting IOER would have a minimal impact (are you paying attention former visiting Fed advisor David "the Fed will bail everyone out always and forever" Zervos), UK retail sales coming in stronger on bigger gas and food purchases (so aside from being ignored for inflation purposes these are useful when extrapolating economic "growth"), July Eurozone inflation coming in just as expected unchanged at 2.4% Y/Y, China FDI collapsing 8.7% as data revealed the longest run of declining inward investment growth in China since the 2008-09 financial crisis sending local markets to 2 week lows as the MOFCOM said the country's 2H export outlook will be even more grim and Premier Wen said easing inflation (not in food) allows for more room to adjust monetary policy, a statement that had zero impact on domestic stocks. As a result we have seen minimal flattening in Spanish and Italian 2s10s, and a continued gradual drift lower in the EURUSD. And this, aside from another week of initial claims that will have the prior week's data revised higher, and a Philly Fed, may be as good as it gets, as volume is set to plumb another multi-year low, and with the 2s10s flattening again, guarantees that bank profits in Q3 will be atrocious, forcing banks to fire even more (or cause various unnamed market makers to accidentally activate 1000x buy algos).

A further recap from SocGen:

We again face an almost exclusively US and UK calendar today, as risk assets and currencies struggle to make up their minds as to whether to push on to March highs (S&P), or let prices languish in a narrow range until we get word from Spain (bailout) and Fed chairman Bernanke (on 30 August). Meanwhile, the corrective move higher in core bond yields continues as 10y Bunds vault 1.55%.

With the exception of the final eurozone CPI (which came in as expected), we rely on impromptu comments from Europe's capitals with regards to the future of Greece and Spain, but statements of the last few days have not swayed too many participants over the course of action come September. The suggestion that Greece will try to negotiate a 2-year extension of its austerity programme is now common knowledge and will be the main topic of negotiations next week, when Greek PM Samaras visits his counterparts in Paris and Berlin. If Greece is confident that it can, on its own, re-arrange the EUR20bn or so of funding costs that a 2-year extension would bring, then surely all we need is for Germany and the Troika to agree that the recession has been deeper than anticipated in the March MOU. Hurdle cleared. If only Spain could be as transparent with regards to its intention to tap the bailout funds.

In the UK, stronger labour market data yesterday defied the more pessimistic forecast, confirming that Q2 GDP figures overstated the weakness in the economy. Retail sales are forecast to confirm a moribund state of demand in July.

Another raft of US data today includes initial claims, Philly Fed and housing construction numbers.