French manufacturing and services PMIs came in slightly stronger than expected, however German manufacturing PMI saw it's fastest contraction since 2009 printing at 44.7 (consensus 45.2).
The Spanish Bond Auction came in with fair bid to covers, the yields however were significantly higher. There were rumors the ECB's SMP facility was in use for the first tim since March buying Spanish debt in the secondary market , trying to support the yields. The debt sold was in the 2, 3 and 5 year range; the 2 year came in over 4.7% (more than double the last auction in March), the 5 years came in at a record 6.072% compared to 4.96% last month!
The new Greek coalition government agreed to ask the EU for 2 more years to meet their fiscal targets, this AFTER Germany already shot down any thought of a time extension.
After the open, this news comes from Greece... As I mentioned, those in the worst scenario seem to get the best treatment, it seems Greece has noticed this as well.
- *GREEK COALITION PARTIES AGREE ON POINTS FOR BAILOUT TALKS
- *GREEK COALITION PARTIES AGREE ON STATE ASSET SALES
- *GREECE TO PRESS TROIKA ON NO JOB CUTS IN PUBLIC SECTOR
- *GREEK COALITION PARTIES WANT TO RETRACT CUT TO MINIMUM WAGE
- *GREECE TO PRESS TROIKA ON NO FURTHER WAGE CUTS FOR 2013-2014
- *DE JAGER SAYS GREECE HAS NO ALTERNATIVE TO PAINFUL CUTS
- *DE JAGER: THERE WILL BE NO SOFTENING OF CONDITIONS FOR GREECE
- *DE JAGER SAYS ROOM FOR GREECE IS EXTREMELY LIMITED
- *DE JAGER SAYS WE SHOULDN'T SPECULATE ON MORE TIME FOR GREECE
As to the North South Divide in the EU...
As per the WSJ overnight...
Italy, France and Spain are trying to take a united stand against Germany in finding new ways to fight the euro-zone debt crisis.
Italian government officials said on Wednesday that a still-vague proposal by Prime Minister Mario Monti this week to start bond purchases by Europe's bailout funds would be a topic of discussion at a four-way European summit in Rome on Friday.
Europe's rescue funds are allowed to buy government bonds, but they haven't done so yet. Such a program was envisioned as a way to allow countries facing market pressure to get help without the attached strings of a full bailout program.
Countries have so far instead relied on the ECB to do the job. As of last week, the ECB held €210.5 billion ($267 billion) of government bonds, but it has always been a reluctant buyer and made its last such purchases in mid-March.
Mr. Monti's comments, which were backed by French President François Hollande and which a Spanish minister described as "intelligent,"
Any attempt to loosen bailout rules, however, would be staunchly rejected in Germany, which has also long opposed a bigger role for the ECB in resolving the debt problems of individual countries.
"There will never be any purchases without conditions," a German government spokesman said on Wednesday.
Perhaps the German Response? From Reuters:
German Court May Delay Bailout Fund Ratification
Germany's constitutional court said on Thursday it will need time to study the euro zone's permanent bailout mechanism after its expected approval in the German parliament next Friday, which could delay its scheduled start date on July 1
Angela Merkel's government and the centre-left opposition reached a deal on economic growth measures on Thursday which should enable parliament to ratify Merkel's fiscal pact and the European Stability Mechanism (ESM) on June 29.
The ESM cannot come into effect without ratification by Germany, the biggest economy in the euro zone. But a spokeswoman for the top court said the ESM is so complex it expects head of state Joachim Gauck to delay his signature of the text approved by parliament until the court has had time to study it.
Next came news that another banking downgrade is imminent from Moody's, but not just some unheard of PIIGS banks,
- Moody's expected to announce ratings downgrade for UK banks this evening - Sky Sources
- Exclusive: Big news - I'm told Moody's will announce downgrades of some of world's biggest banks, incl in UK, after US mkts close tonight. - Sky's Mark Kleinman
In the US this a.m.:
At 8:30 Initial Claims were released...
| |||||||||||||||||||||||
| Claims missed consensus for the 7th consecutive week and 23 of the last 26 Initial Claims have missed. However you may have heard Claims beat as last weeks 386k print was (as usual) revised higher to 389k making this weeks 387k print seem like an improvement-ah the games the media plays in an election year. You may have heard two days ago that the EU decided to create legislation that nullifies the use of rating agenciy ratings? I wonder why? Pre-market we get this from Reuters: | |||||||||||||||||||||||
ECB mulls scrapping rating rules for government bonds: sources
The European Central Bank is discussing a medium-term plan to scrap rating rules on euro zone sovereign bonds and instead set their value when used as collateral in lending operations on its own internal assessment, central bank sources said
The discussion come as Spain braces for a downgrade from small rating firm DBRS, which without a change in ECB rules will trigger an extra 5 percent penalty on Spanish bonds when used to get ultra-cheap ECB funding.
"In the case that the ECB Governing Council decides this, it would reduce the widely criticized influence of Standard & Poor's, Moody's and Fitch," one euro zone central bank source who spoke on the condition of anonymity said.
"On the other hand, this could also expand the shrinking pool of collateral which banks in troubled countries have available."
Banks have to submit bonds or other types of securities to the ECB as collateral if they want to access its liquidity. Throughout the crisis, the requirements on such collateral has been repeatedly reduced to ensure troubled banks remain able to refinance at the central bank.
Opposition, in particular from the Bundesbank, has been strong, however. The German central bank has argued that the dramatic loosening of the rules has increased the risk of lending to banks for the ECB and the national central banks.
At 10 a.m. in the US, the Philly F_E_D was released...
Released On 6/21/2012 10:00:00 AM For Jun, 2012| Prior | Consensus | Consensus Range | Actual | |
| General Business Conditions Index - Level | -5.8 | 0.5 | -3.0 to 4.0 | -16.6 |
Market Action...
As for ES and Euro-Dollar-ES was relatively unchanged from the 4 p.m. close yesterday to the NY open this a.m.
As for ES and Euro-Dollar-ES was relatively unchanged from the 4 p.m. close yesterday to the NY open this a.m.
ES with a negative divergence pre-market and just recently some stabilization in ES intraday on a relative positive divergence.
I'm surprised with all of the horrible manufacturing PMIs and the $USD gaining, that oil has held up as well as it has. USO and market updates next...
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