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Wall Street looks set to drop at Monday’s opening bell, as investors look to round off October will a bout of profit taking after four weeks of equities gains.
Stock index futures fell in lackluster volume before Monday’s open, following four weeks of equities gains. U.S. stocks closed out a fourth week of gains on Friday, with the S&P 500 on track for its best monthly performance in more than two decades.
In company news, troubled brokerage MF Global Holdings is near a deal to file for bankruptcy protection and sell assets to Interactive Brokers Group, the Wall Street Journal and Financial Times reported.
As the chart below shows, 3 of the top 4 Italian banks (Intesa, UniCredit, Monte Pasci, And MedioBanca) are now trading below their levels at the time of the bailout.
The duration of the European bailout was 48 hours give or take. And now reality is back in the form of the following headlines:
* Italian 10 Year BTP Yield surges to all time high 6.153% before ECB intervention takes it back to ... 6.122%
* Expressed in price, they have dropped to a record 90.697
* Italian-German 10 year yield passes 400 bps
* Italy CDS soar 22 bps to 427 bps
* Italy 5 Year yields bonds join drop, yield rises to over record 5.91%
See a trend? The one thing Europe was trying to avoid, contagion spreading to Italy, has happened.
Aaa-rated euro area countries: neutral to negative. These countries face increased exposure from European Financial Stability Facility (EFSF) first-loss guarantees potentially being called. Also, the prospect of additional mutual support implies a greater risk to creditors of the countries that ultimately provide support.
Just in case Greece needed one more reason to piss off the angry mob, just waiting to resume its Syntagma square festival, Ekathimerini reports that very soon Greeks will discover that not only are their pension funds about 50% underfunded funded courtesy of the first of many European 'bailouts', but that they will actually have to repay pension proceeds back.
Time to drag the recession talk back? After three months of the Chicago PMI (a key advance indicator for the ISM), bucking the trend of the other high frequency economic indicators and beating expectations consistently, it is the PMI itself that finally missed consensus, printing at 58.4 on expectations of 59.0, and down from a 60.4 in September. The strength in the report was in Employment, which was the highest in 6 months, while New Orders "erased half of Spetember's gains." Inventories dropped from 60.3 to 54.4, Production was down from 63.9 to 63.4, while inflation returns as Prices Paid rose from 62.3 to 66.0.
Baltic Dry Index falls 2.6% to 1,965 points
EUR/USD moves up around 20pips, whereas Bund futures fell around 10ticks following news of active support from China to debt-stricken Eurozone countries
French T-Bill Auction Results
- French 13-week T-Bill auction for EUR 4.504bln, bid/cover 1.79 vs. Prev. 1.86 (yield 0.560% vs. Prev. 0.431%)
- French 20-week T-Bill auction for EUR 1.004bln, bid/cover 3.11 vs. Prev. 3.38 (yield 0.660% vs. Prev. 1.205%)
- French 28-week T-Bill auction for EUR 2.003bln, bid/cover 1.94 vs. Prev. 3.02 (yield 0.687% vs. Prev. 0.491%)
ITALY 439/447 +38
SPAIN 333/341 +22
PORTUGAL 950/980 +5
IRELAND 675/705 +20
GREECE 53/56 +1
BELGIUM 265/275 +28
FRANCE 172/176 +14
AUSTRIA 139/144 +14.5
UK 81/85 +7
GERMANY 82/85 +7
Originally posted by camaro68ss
reply to post by Vitchilo
but...but....but... I thought the euro zone made a deal and everything was all better now
You have to give it to the European Council. They are pretty good at stitching up impressive looking deals, having lowered expectation to a bare minimum beforehand. But the effectiveness of an agreement should not be gauged by the immediate market reaction, let alone by how the agreement compares with expectations.
It just goes from bad to worse for Europe, which had been hoping to issue €5 billion in 15 year bonds to finance part of the Irish bail out via the EFSF. Instead, once seeing the orderbook, or lack thereof, Europe ended up slashing the notional by 40% and the maturity by 33%, to a €3 billion issue due 10 years from now. And that is hardly the end of the concessions. As the FT reports, "The bond from the European Financial Stability Facility will only target €3bn, instead of €5bn, and will be in 10-year bonds rather than a 15-year maturity because of worries over demand. A 10-year bond is more likely to attract interest from Asian central banks than a longer maturity. Banks hired to manage the deal are Barclays Capital, Crédit Agricole and JPMorgan." Do you see what happens Larry, when China walks? But so we have this straight, Europe plans to fund a total of €1 trillion in EFSF passthrough securities.... yet it can't raise €5 billion? Just.... Priceless.
As for the levels, regulars know that EFSF spreads have blown out to records lately, meaning that as less demand materializes, spreads will have to go ever higher, in the process obviating the advent of reality courtesy of a French downgrade. It seems the market has already priced it in!
According to Rep. Paul Kanjorski (D) (PA-11), in mid-September of 2008, the United States of America came just three hours away from the collapse of the entire economy. In a span of 2 hours, $550 billion was drawn out of money market accounts in an electronic run on the banks.
Rep. Kanjorski: "It would have been the end of our economic system and our political system as we know it."
Just like with Lehman, when it took 3 days for the full consequences of the bankruptcy to manifest themselves in the form of a complete freeze of money markets, so too now we are starting to see the same phenomenon following the blow up of one of the world's largest exchanges. The first observation comes courtesy of Dow Jones which informs us that the MF Bankruptcy has "devastated stock futures liquidity." Specifically, "MF Global's departure from the clearing scene has "devastated liquidity" in stock index futures, a long-time CME floor broker said. He estimated about a third of the pit population is missing. On a normal day, six or seven filling brokers stand on the top rail. That's down to three.