North American Investment Grade CDS Index 86.26 -1.03%
European Financial Sector CDS Index 159.77 bps +10.83%
Western Europe Sovereign Debt CDS Index 186.67 bps +3.84%
Emerging Market CDS Index 210.99 bps -.06%
2-Year Swap Spread 23.0 -1 bp
TED Spread 20.0 unch.
Economic Gauges:
3-Month T-Bill Yield .10% unch.
Yield Curve 274.0 +3 bps
China Import Iron Ore Spot $169.60/Metric Tonne +.30%
Citi US Economic Surprise Index +17.40 -.4 point
10-Year TIPS Spread 2.28% unch.
Overseas Futures:
Nikkei Futures: Indicating +89 open in Japan
DAX Futures: Indicating +30 open in Germany
Portfolio:
Slightly Higher: On gains in my Tech, Ag and Retail long positions
Disclosed Trades: None
Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher despite recent stock gains, rising eurozone sovereign debt angst, Korean peninsula concerns and weakness in some overseas equity markets. On the positive side, Gaming, Education, REIT, Homebuilding and Coal shares are especially strong, rising more than 1.0%. (IYR) has outperformed throughout the day. Lumber is rising another +1.8% and copper is rebounding another +1.02%. The 10-year yield is stable. On the negative side, Construction, Steel, Defense and Road & Rail shares are relatively weak today, falling more than .5%. The Greece sovereign cds is climbing +2.84% to 997.50 bps, the Spain sovereign cds is climbing +2.51% to 340.11 bps, the Russia sovereign cds is gaining +2.22% to 147.90 bps and the China sovereign cds is surging +7.9% to 73.2 bps. The Euro Financial Sector CDS Index is soaring to the highest level since late June and the Western Europe Sovereign CDS Index is very near its record high set last month, which is also a big negative. Short/intermediate-term gauges of investor sentiment remain overly bullish. US stocks remain extremely resilient, which is a large positive. I am surprised that equity investors aren't yet more concerned about what is going on in Europe. Seasonality, diminishing attacks from Washington on business and better US economic data are trumping euro concerns so far. If European debt fears calm early next year, then stocks should make another meaningful push higher. However, we are likely now at the point that if the euro situation continues to deteriorate it will lead to a significant adverse impact on equities in 1Q. I expect US stocks to trade modestly lower into the close from current levels on China inflation worries, profit-taking, more shorting and rising eurozone debt fears.
You relate: I am surprised that equity investors aren't yet more concerned about what is going on in Europe.
If I were a financial market place investor, I would be terrified. Years ago I decided to invest in gold bullion as I was concerned then about sovereign debt risk.
Frankfurter Allgemeine said German banks have the highest credit risks in Ireland. The exposure of German banks was €113bn, while the largest exposure to Ireland in terms of the bank’s host country’s GDP came from Belgium.
DB turned lower today.
I believe that the European Financials are going to take the world lower any day. In fact, I believe there is coming soon a cataclysmic wipeout, or better said flameout in the finanical markets over the European Bank and European Sovereign Debt issue.
The ratio of the financial shares relative to the S&P, XLF:SPY, fell lower suggesting that both will be falling immediately lower.
The Value Growth Yield Curve, RZV:RZG, steepened as small cap value shares rose more than the small cap growth shares. The strong rise in the value-growth yield curve documents the demand for small cap value shares over the growth shares, and documents how investors are seeking a safe haven, if it be called that, in US based bank and revenue shares. It is also a measure of tension in carry trades, that is to say that carry trades are greatly wound up; when these release there will be a terrific deleveraging and fall in asset value of the small cap shares.
1 comment:
You relate: I am surprised that equity investors aren't yet more concerned about what is going on in Europe.
If I were a financial market place investor, I would be terrified. Years ago I decided to invest in gold bullion as I was concerned then about sovereign debt risk.
Frankfurter Allgemeine said German banks have the highest credit risks in Ireland. The exposure of German banks was €113bn, while the largest exposure to Ireland in terms of the bank’s host country’s GDP came from Belgium.
DB turned lower today.
I believe that the European Financials are going to take the world lower any day. In fact, I believe there is coming soon a cataclysmic wipeout, or better said flameout in the finanical markets over the European Bank and European Sovereign Debt issue.
The ratio of the financial shares relative to the S&P, XLF:SPY, fell lower suggesting that both will be falling immediately lower.
The Value Growth Yield Curve, RZV:RZG, steepened as small cap value shares rose more than the small cap growth shares. The strong rise in the value-growth yield curve documents the demand for small cap value shares over the growth shares, and documents how investors are seeking a safe haven, if it be called that, in US based bank and revenue shares. It is also a measure of tension in carry trades, that is to say that carry trades are greatly wound up; when these release there will be a terrific deleveraging and fall in asset value of the small cap shares.
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