Thursday, 4 August 2011

Markets update - Credit - Rates - Equities - Appetite for destruction

Appetite for Destruction, arguably the best album from Gun's and Roses.

Today's could clearly be linked to their song from the album, Welcome to the Jungle...

"Welcome to the jungle
We take it day by day
If you want it you're gonna bleed
But it's the price you pay"

and some more lyrics from the same song...

"Welcome to the jungle
It gets worse here everyday
Ya learn ta live like an animal
In the jungle where we play"

But back to where the jungle was, namely today the markets and it was a bloody mess to say the least.

Flight to quality, still on big time, German Bond 10 year yields going down faster than a rat on roller skates:

Swiss National Bank intervention on EUR/CHF, much a do about nothing...they did not break the trend:

But what is as play with the strength of the Swiss Franc, the swiss stock market, as per another Bloomberg Chart of the Day graph:

Gold, rising strongly then falling back fast in a late intraday move that left me puzzled but it appeared it is due to margin calls according to ZeroHedge:

and what a difference a few minutes make...Gold selling off:

In the peripheral space, Italian, Spanish and Greek government bonds are selling off again, reaching new records and adding fuel to an already volatile situation:
Greek two year bonds, going back up:

Italian 10 year Government bonds, trending up:

and Spain, 10 year Government bonds:

In the credit space, the movement was similar with most credit indices widening, signalling an increase in risk aversion:
Crossover credit index 5 year widening by 34 bps on the day. Big move. Now standing at 516 bps:

And the equity markets, an awful bloodbath...
French CAC40 index, it was indeed, as I my previous post stated, hammer time...

Dow Jones Weekly, its bungee time...

Spanish Equity index in freefall:

So much for a treasury sell-off, the US Treasury 10 year bond is on fire and the debt ceiling debate was a side show. What really matters is the economic picture which is really grim at the moment, from one bad data release to another:

Bloomberg's Chart of the Day, the Baltic Dry index showing that there wasn't really a recovery in the first place, as I posted before, we had a Dead Cat Bounce:

and finally, what's the correlation between US Financials and European Financials?

According to Bloomberg, one percentage point decline in US economic growth could translate in a five-point slump in earnings for the next 12 months.

A bank is the second derivative to the growth of the economy. This is why it is so important to track economic activity, as banks are at the heart of the economic system when it comes to providing the means to its development.

Back to the bunker, time for some rest before tomorrow's Nonfarm Payroll number in the US and employment data...

Good night and good luck.

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