December 21, 2011
Successful Spanish bond auctions, improved German confidence numbers, and better than expected new home starts and building permits sent markets soaring yesterday. The big (ugly) picture has not changed- yet the S&P 500 closed up +2.98% and the Euro Stoxx 50 was up +2.70%- along with the rest of the major European indices. Year-to-Date, the S&P 500 is down -1.30%, the Euro Stoxx 50 down -18.99%, and the Nikkei 225 down -17.36%. Spanish 10Y bond yield (5.07%) spreads to German bunds (1.96%) fell to around 300bps, leaving its 50 DMA at 363bps.
*Pimco’s CEO, Mohamed El-Erian, said yesterday that he believes there is more than a 1 in 3 chance that the euro zone will break apart and trigger a crisis akin to the financial meltdown that devastated the global economy in 2008.
The ECB loaned 523 euro area banks 489B Euros ($645B), almost double the median estimate of 293B Euros from a Bloomberg survey. The ECB also loaned $33B for 14 days in a dollar offering, up from $5.1B just a week ago. While the 489B euro take up shows banks’ “liquidity needs are being amply met,” says Jonathan Loynes, chief European economist at Capital Economics, he remains skeptical it will ease the sovereign debt crisis.
MBA Mortgage applications for the period ending Dec. 16 came in at -2.6% versus a 4.1% estimate. Although this indicator is volatile, it indicates purchases and refinancing have slowed- proving that the lowest borrowing costs on record are not enough to spur demand in the housing markets.
The Bank of Japan (BOJ) downgraded their outlook of the economy for the second month in a row, but chose not to boost monetary stimulus- citing easy domestic financial conditions. Improvement in business sentiment has been sluggish, and exports & production have remained “more or less flat.”
At 7:50am CST, S&P futures were down -0.138%, the Euro Stoxx 50 is down -0.62%, and the Nikkei 225 has closed up +1.48%.
I sure wish politicians in Europe (heck- here at home too) would pay attention to the quote I’m using this morning. Have a great day folks- thanks for reading.
Today’s Economic Data Lineup: (EST)
7:00am, MBA Mortgage Applications, week of Dec. 16
10:00am, Existing Home Sales, Nov., est. 5.1m from 4.97m
10:00am, Existing Home Sales, M/m, Nov., est. 2.6% from 1.4%
11:00am, Fed to sell $8b-$8.75b notes in 11/30/2013 to 3/31/2014 range
1:00pm, U.S. to sell $29b 7-yr notes
2:00pm, Fed to sell $8b-$8.75b notes in 6/15/2013 to 11/15/2013 range
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