Events

Take a look at the ES chart from overnight...

Es was flat even in to the European open 93 a.m. EDT- green arrow), it was around 4 a.m. EDT after successful Spanish and Italian debt auctions that the market shot up . The auctions were very successful with Spain selling nearly double their target and Italy meeting their target. This is NOT what the market expected, but after listening back to Draghi's press conference I tried to imagine what the tone would have been had the debt auctions failed. Draghi sidestepped a question about LTRO-Sarkozy trade pretty smoothly as the facts show plainly it is just not there. We have seen at least 1 and probably 2 times when the auctions were almost certainly supported by the ECB via arrangements with several banks as the ECB is not allowed to directly participate in primary offerings and it certainly raises questions in my mind whether that may have happened again considering the questions Draghi would be taking at the press conference, many LTRO related.

Yesterday rumors started circulating again that a French downgrade is imminent, Sarkozy'z comments overnight that a downgrade isn't "insurmountable", almost seems to confirm the French government has already been notified. Why not point out that Fitch just said 2 days ago that they don't see a French downgrade in 2012?

Not that this is news, just the latest, a senior cabinet member in Merkel's party said that Greece would have to exit the Eurozone. There have been many events n Greece this week that are to put it mildly, strange, that have gone largely unnoticed (i.e.- Weapons purchases with bailout cash). That statement was followed up by Draghi in his press conference calling the Greek situation, "unique".

After the ECB's rate decision, to leave rates alone, the Euro caught a bit of a bid, however it doesn't seem to be helping the market much as of now.

Today's US Macro Economic Data definitely put a damper on enthusiasm in the market as I showed you with the earlier ES chart. There are two camps in the market, those that think the US can and is decoupling from the world economy and those that think it is simply lagging it. Today's economic data suggests the lag theory is more appropriate. Even the Sears news falls along those lines as the early perceived holiday retail strength is being shown to have been at the cost of margins, in some cases, negative margins just to move inventory. When we hear Walmart is having vendor financing pulled, then we know it's game over in a way that we have never seen. Remember Sears=Kmart as well.

I'm very interested in what Credit is doing this morning, I had some problems with the template that I just resolved and it is loading so we'll see shortly.

Oh and one other thing, the ECB will be lowering collateral standards from the already low single A to....? Well something lower. The next LTRO should see massive subscription as the ECB further opens their balance sheet to the junk on the books of the EU banks, there's probably more then 1 reason for them doing this, I would think at least temporarily it will boost the bank's Tier 1 capital ratios, albeit for 3 years. I don't know that it will lead to the Sarkozy dream of a carry trade. Just imagine the banks being able to take junk paper and turn it in to tier 1 capital, I doubt they'll be eager about letting go of that capital.