+0.14%
-0.38%
Here’s my take on the markets today, May 18, 2012. If you’d like to read more of my articles, click here.
Credit gauges are mostly deteriorating again today. The 2Y Swap Spread is falling -2.4% to 35.75 bps. The France sovereign cds is down -1.6% to 217.34 bps. The Italian/German 10Y Yld Spread is falling -.94% to 436.82 bps. However, the 3M EUR/USD Cross-Currency Basis Swap is falling -3.6% to -51.0 bps(-13.3% in 5 days). The TED Spread is rising +2.7% to 38.6 bps. The Portugal sovereign cds is gaining +3.8% to 1,204.96 bps(+12.1% in 5 days). The Ireland sovereign cds is rising +4.2% to 702.66 bps(+18.0% in 5 days). The Japan sovereign cds is rising +1.0% to 108.83 bps(+10.1% in 5 days). The US sovereign cds is gaining +3.5% to 44.5 bps. The Emerging Markets Sovereign CDS Index is jumping +5.2% to 335.24 bps(+13.7% in 5 days). The China sovereign cds is gaining +2.2% to 136.09 bps(+14.7% in 5 days). Overall, credit gauges continue to deteriorate too rapidly and remain at stressed levels.
Major Asian indices fell around -2.0% overnight, led down by a -3.4% decline in South Korea. South Korea’s KOSPI is down about -13.0% in 6 weeks and is now down -2.4% ytd. Major European indices are mostly lower, led down by a -1.3% decline in the UK. Italy fell another -.3% and is down -23.8% in 2 months(-13.3% ytd). Russian shares are declining another -1.8% today and are down -24.6% in about 2 months. The Bloomberg European Bank/Financial Services Index is falling -1.2%(-8.5% for the week) and is down -24.8% in 2 months.
The 10Y T-Note is just slightly lower and copper continues to trade poorly, which remain red flags. Moreover, the China Iron Ore Spot Price Index is down another -1.72% today and is down -12.11% in 5 weeks. The euro currency is oversold and is trying to bounce right at its mid-Jan. lows. This bounce could last a few days, but I still expect the euro to trade significantly lower over the intermediate-term.
Some of the recent selling in market-leader Apple(AAPL) was likely related to the Facebook(FB) IPO and the stock is trading better today. Long AAPL. However, I am not ready to add to my position again due to broad market concerns. So far, the Facebook IPO has been “disappointing”. While the stock may outperform in the short-run due to its muted opening price, I would still not be a buyer around current levels for the intermediate-term given its valuation, slowing growth metrics and too many questions surrounding the company’s ability to further monetize its business model. US stocks remain relatively resilient given the outsized declines in Asia overnight. The total put/call is high again at 1.42. I have not traded today and I am positioned 50% net long.
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