Overnight Sentiment: Directionless

In a market in which horrible data leads to upward stock spikes, what can one expect but a directionless market for now: after all today's biggest pending disappointment, the durable goods orders due out in an hour, has not hit the tape yet sending stocks soaring. Newsflow out of Europe is more of the same, summarized by the following BBG headline: 'MERKEL SAYS EURO BONDS ARE THE ‘WRONG WAY." We for one can't wait for the algos to read into this as more bullish than Eurobonds only over her dead body. Perhaps that explains why despite the constant barrage of abysmal economic data, capped by today's epic collapse in MBS mortgage applications plunging 7.1% or the most since March despite record low mortgage yields, futures are once again green. In summary: the usual Bizarro market which has by now driven out virtually everyone.

And in detail, from BofA:

Market action

Asian equity markets broke a four day losing streak as speculation rises that China will step up economic stimulus measures in the months ahead. That said the gains were limited by the fact that many see this week's EU summit as providing little or no concrete action on resolving the sovereign debt crisis. To read a full preview see the European Watch section below. 

The MSCI Asia Pacific index rose 0.8% overnight. The region's best performing market was the Hang Seng up 1.0%. The Japanese Nikkei was a close second up 0.8% and the Indian Sensex finished the day 0.4% higher. On the flip side, the Shanghai Composite fell 0.2% and the Korean Kospi finished flat.

In Europe, equities are trading 0.5% higher in the aggregate. The blue chips are outperforming up 0.6% while shares in Germany are lagging the broader market up only 0.2%. At home, futures are pointing to a small gain of 0.1% in the S&P 500 later today. 

In bondland, Treasuries are selling off modestly in the longer end of the curve. The five year yield is unchanged at 0.72% while the 10-year and long bond yields are up 1bp to 1.63% and 2.70%, respectively. In Europe, we continue to monitor Spain's 10-year yield which fell 3bp in early trading to 6.76% and the Italian 10-year which is down 7bp to 6.08%. 

The dollar is roughly unchanged in the currency markets. Commodity prices are slightly lower. WTI crude oil is down 21 cents to $79.15 a barrel and gold is off $3.83 an ounce to $1,569.10. 

Overseas data wrap-up

Spain's retail sales fell 4.9% yoy in May. That follows a 10.0% yoy drop in the prior month. Retail sales figures tend to be very volatile; however, that said we see consumer spending coming in very weak in Spain this year due to rising unemployment, weak wage growth and austerity measures that sap consumer's buying power


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