Smell the Coffee in the morning, while the market smells napalm

Here's a review of what has happened overnight sending the market gapping lower and Euro continuing last night's sell-off.

 Today's open and the continued rounding over of the market (as a reminder, tops are a process, not an event, the same can be said of bottoms).

Here's the triangle in the Euro I showed you last night which had just broken to the downside with the start of this week's FX trade.




If the coming S&P EU ratings downgrades weren't enough, here comes the rest of the rating's sheep.


From Moody's

Moody's EU review 

Pressure Remains On Euro Area Sovereigns In Absence of Decisive Initiatives

The communiqué issued by European policymakers after the recent euro area summit offers few new measures and therefore does not change our analysis of the rising threat to the cohesion of the euro area and the further shocks to which it and the wider EU remain prone. As we announced in November, unless credit market conditions stabilise in the near future, our ratings of all EU sovereigns will need to be revisited. The communiqué does not change that view, and we continue to expect to complete such a repositioning during the first quarter of 2012.

As a result, the communiqué does not change our view that the crisis is in a critical, and volatile, stage, with sovereign and bank debt markets prone to acute dislocation which policymakers will find increasingly hard to contain. While our central scenario remains that the euro area will be preserved without further widespread defaults, shocks likely to materialise even under this 'positive' scenario carry negative credit and rating implications in the coming months. And the longer the incremental approach to policy persists, the greater the likelihood of more severe scenarios, including those involving multiple defaults by euro area countries and those additionally involving exits from the euro area.

As a result everything in Europe is down except yields on Italian BTPs.

Italian BTPS are higher after the LCH margin cut, about to become a margin hike in a record time reversal of margin policy.

BTPS are about 6.71% last I saw, closing in on 7% again and this with apparent ECB buying.

From Bloomberg: 

European leaders pressed the case that a new fiscal accord will deliver the region from its two- year debt crisis, as Germany’s top central banker cooled speculation the European Central Bank will extend its role.

Bundesbank President Jens Weidmann told the Frankfurter Allgemeine Sonntagszeitung that while the new accord represents progress, the onus is on governments rather than the Frankfurt- based ECB to resolve the crisis with financial backing.

“The mandate for redistributing taxpayer money among member states clearly does not lie in monetary policy,” Weidmann told the newspaper in an interview published today. “Financing of sovereign debt through central banks is and remains forbidden by treaty.”

And there goes another Bazooka....

And in techland....

Intel's Q4 Guidance

INTC cuts revenue guidance by $1BB due to hard disk drive supply shortages.

The company now expects fourth-quarter revenue to be $13.7 billion, plus or minus $300 million, on both a GAAP and non-GAAP basis, lower than the previous expectation of $14.7 billion, plus or minus $500 million.

And if all that is not enough...

Iran From Reuters

Iranian MP says Iranian military will practice closing the Straits of Hormuz to shipping.

A member of the Iranian parliament's National Security Committee said on Monday that the military was set to practise its ability to close the Gulf to shipping at the narrow Strait of Hormuz, the most important oil transit channel in the world, but there was no official confirmation.

 

The legislator, Parviz Sarvari, told the student news agency ISNA: "Soon we will hold a military manoeuvre on how to close the Strait of Hormuz. If the world wants to make the region insecure, we will make the world insecure."

From Wikipedia 

The Straits of Hormuz is a narrow, strategically important waterway between the Gulf of Oman in the southeast and the Persian Gulf. On the north coast is Iran and on the south coast is the United Arab Emirates and Musandam, an exclave of Oman.

The strait at its narrowest is 54 kilometres (34 mi) wide.[1] It is the only sea passage to the open ocean for large areas of the petroleum-exporting Persian Gulf. About 13 tankers carrying 15.5 million barrels (2,460,000 m³) of crude oil pass through the strait on an average day, making it one of the world's most strategically important choke points. This represents 33% of the world's seaborne oil shipments, and 17% of all world oil shipments in 2009.[2]

The last I recall, the John Stennis US Aircraft Carrier was in the region as of last Wednesday's Stratfor naval update.