-1.35%
-1.08%
Here’s my take on the markets today, May 23, 2012. If you’d like to read more of my articles, click here.
Credit gauges are deteriorating again today. The Libor-OIS Spread is rising +3.9% to 31.7 bps. The 3M EUR/USD Cross-Currency Basis Swap is falling -4.5% to -49.54 bps. The 2Y Swap Spread is rising +8.8% to 36.25 bps. The European Investment Grade CDS Index is climbing +5.6% to 180.93 bps. The European Financial Sector CDS Index is gaining +5.4% to 295.31 bps. The Germany sovereign cds is gaining +2.4% to 199.16 bps. The France sovereign cds is gaining +2.2% to 216.62 bps. The Spain sovereign cds is gaining +2.6% to 542.33 bps. The Italian/German 10Y Yld Spread is jumping +5.2% to 432.36 bps. The Emerging Markets Sovereign CDS Index is gaining +4.7% to 334.50 bps. The Russia sovereign cds is gaining +3.7% to 240.37 bps. The Brazil sovereign cds is gaining +3.0% to 161.20 bps.
Major Asian indices fell around -1.5% overnight, led lower by a -2.0% decline in Japan. Plans for Chinese wealth redistribution will likely further dampen growth in the region if implemented. The China Iron Ore Spot Index is falling another -.92% today and is down -13.0% in less than 6 weeks(-28.2% since 9/7/11). Major European indices are falling around -2.0%, led lower by a -2.8% decline in Italy. Spain is falling another -2.4% and is down -23.9% ytd. Both are back near their recent lows after a modest bounce. The Bloomberg European Bank/Financial Services Index is falling -2.2% today(-23.3% since March 19th).
The weekly MBA Home Purchase Apps Index fell -3.0% this week and remains in the same range it has been trapped in since May 2010. I suspect home sales for May will prove disappointing after April’s modest improvement. I still expect homebuilding shares to underperform from current levels through year-end.
The 10Y yld is only 5 bps away from its record low of 1.67%. Copper continues to trade very poorly and is taking out its recent low. I said a few months ago during the peak of US economic optimism that the Cyclicals would underperform through year end. Since March 19th, the MS Cyclical Index is down -14.0%. I still expect further underperformance from these shares over the intermediate-term. The euro currency is breaking technical support and I still see substantial downside from current levels over the longer-term. Aggressive dip-buyers once again appeared in US stocks after an opening swoon, however the closely-watched euro currency did not confirm this bounce. I added to my index hedges this morning and I am positioned 25% net long.
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