Gary Smith’s Market Take

Here’s my take on the markets today, April 23rd, 2013. If you’d like to read more of my articles, click here.

Credit gauges are mixed today. The 2Y Euro Swap Spread is down -4.4% to 37.55 bps. The European Investment Grade CDS Index is down -2.45% to 107.92 bps. The European Financial Sector CDS Index is down -4.8% to 159.19 bps. The Germany sovereign cds is down -1.5% to 34.1 bps. The France sovereign cds is down -1.8% to 75.15 bps. The Spain sovereign cds is down -5.4% to 244.90 bps. The Italy sovereign cds is down -3.7% to 251.14 bps. The Italian/German 10Y Yld Spread is falling -5.8% to 266.23 bps. The Spain 10Y Yld is down -5.1% to 4.26 bps. The Ireland sovereign cds is falling -5.2% to 162.02 bps. The Slovenia sovereign cds is down -7.7% to 311.65 bps. However, the Libor-OIS Spread is gaining +1.75% to 14.56 bps. The 3M EUR/USD Cross-Currency Basis Swap is falling -3.4% to -17.86 bps(-8.4% in 5 days). The 2Y Swap Spread is gaining +1.2% to 13.5 bps. The Asia-Pacific Sovereign CDS Index is gaining +.34% to 90.3 bps. The Japan sovereign cds is up +.25% to 67.4 bps. The China sovereign cds is up +1.98% to 73.21 bps. The China Development Bank Corp cds is jumping +6.6% to 89.67 bps. The South Korea sovereign cds is up +2.3% to 75.16 bps.

Major Asian indices were mostly lower overnight, led down by a -2.6% drop in China(-3.7% ytd). Major European indices are higher, boosted by a +3.3% gain in Spain. The Bloomberg European Bank/Financial Services Index is surging +3.2%. Brazil is bouncing +1.2% from recent losses, but still trades poorly.

The Euro is falling -.5% today and is now slightly below its downward-sloping 50-day. Oil(+.08%) and Copper(-1.4%) continue to trade very poorly. The China benchmark Iron-Ore Spot Index is falling -1.2%. Gold is falling -1.0%, but has stabilized after its recent collapse. Lumber is down -.22%. The UBS-Bloomberg Ag Spot Index is down -.9% and still trades very poorly. The 10Y T-Note still trades too well, with the yield flat today at 1.69%, despite the equity rally.

The major averages are back in “risk-on” mode as investors continue to focus on potential central bank actions as the macro backdrop deteriorates further. The Citi Eurozone Economic Surprise Index is plunging another -18.2 points today to -56.4 points, the lowest since August of last year. The poor data out of Europe has boosted expectations for a rate cut and recent comments from some European officials have raised hopes for an end to austerity, which would temporarily calm markets further, at the expense of the longer-term. However, I remain skeptical that Germany will go along with this. Tensions between China and Japan are escalating again. At the same time, China’s economy is looking more and more problematic for the global economy. The Citi Emerging Markets Economic Surprise Index is dropping -4.1 points today to -42.9 points, the lowest since June of last year.

Alt Energy, Computer, Disk Drive, Insurance, Homebuilding, Education and Airline shares are very strong today, while Coal, Oil Tanker, Metals & Mining and Road & Rail stocks are weak. I covered some of my index trading hedges this morning and put them back in place. I am still positioned 50% net long.