Here’s my take on the markets today, September 5th, 2012. If you’d like to read more of my articles, click here.
Credit gauges are mixed today. The TED Spread is down -5.3% to 30.8 bps. The European Investment Grade CDS Index is -2.1% to 140.12 bps. The European Financial Sector CDS Index is falling -2.5% to 232.83 bps. The Germany sovereign cds is down -1.1% to 58.66 bps. The France sovereign cds is down -1.3% to 131.33 bps. The Spain sovereign cds is down -4.2% to 451.50 bps. The Italy sovereign cds is down -5.9% to 395.84 bps. The Spain 10Y Yld is falling -2.4% to 451.5 bps. The Italian/German 10Y Yld Spread is falling -5.6% to 403.55 bps. However, The 3M EUR/USD Cross Currency Basis Swap is plunging -11.8% to -30.47 bps. The FRA/OIS Spread is gaining +.93% to 23.69 bps. The 2Y Swap Spread is rising +1.54% to 16.5 bps. The China sovereign cds is gaining +.5% to 105.19 bps. The China Blended Corporate Spread Index is gaining +.67% to 453.0 bps. Overall, most credit gauges have improved of late, with the exception of those in China, but remain at stressed levels.
Major Asian indices fell overnight, led lower by a -1.74% decline in South Korea. The Nikkei fell another -1.1% and is down -4.3% in 5 days. The Shanghai Comp fell another -.3% to the lowest level since early March 2009. This index is now down -7.4% ytd and down -15.7% over the last 12 months. Major European indices were mixed today as a +.46% gain in Germany was offset by a -.62% loss in Italy. The Bloomberg European Bank/Financial Services Index rose +.4% today.
The euro is bouncing today, but still trades poorly given elevated hopes for an ECB “bazooka” can-kicking. Copper is bouncing +1.4% to the upper end of its 3-month range and is just below its 200-day. Oil is flat today and isn’t trading as well of late given potential upside catalysts. Gold is maintaining recent gains, falling just -.2% today, and is trading well of late. Lumber is falling -.4% and continues to trade very poorly(down about -10.0% in a year) given investor hopes for a major housing bottom. The UBS-Bloomberg Ag Spot Index is falling -1.4% today, but is +25.0% higher since 6/1. The benchmark China Iron-Ore Spot Index continues to crash, falling another -.23% today, and is down -52.1% since 9/7/11. The 10Y T-Note continues to trade too well with the yield rising +2 bps today to 1.59%.
The weekly MBA Home Purchase Apps Index fell -.83% this week and remains stuck in the same range it has been in since May 2010. The Transports continue to trade poorly(-.43% ytd) and remain a big red flag for the broad market. Little being discussed by global central bankers will actually boost global economic growth enough to offset the growing macro headwinds over the intermediate-term, in my opinion. The quality of the stock rally off the June lows remains poor as breadth, volume, leadership, lack of big volume/gainers and copper/lumber/transports relative weakness all continue to be concerns. Thus, I still believe recent market p/e multiple expansion and growing investor bullishness on global central bank stimulus/action hopes is creating an unstable situation for equities, which could become a big problem this fall unless a significant macro catalyst materializes soon. I have not traded today and I am positioned 50% net long.