Recap 2015-01-05


What a crap show. There really isn’t much in the way of fundamentals that is driving the market moves the past few days. Once again, it’s Oil lower => High Yield wider => Equities lower & Risk Free yields lower.

One thing that’s interesting is that major asset prices seem to be near round number levels. An incomplete list:

  • WTI: near 50
  • SPX: near 2000
  • Eurostoxx: near 3000
  • Vix: near 20
  • US 10y: near 2.0%
  • Bunds: near 50bps
  • EURUSD: near 1.20
  • USDJPY: near 120
  • Gold: near 1200

Note that in most instances, those levels have been decent support/resistance historically.

@5_min_Macro also noted that despite the massive risk off move today, 10y bund yields closed higher.

Also, here is an interesting post and charts from the SF Fed. The conclusion:

National and cross-industry evidence shows that pent-up wage cuts reflecting downward nominal wage rigidities have been an important force during the Great Recession and subsequent recovery. The rigidity of wages in a number of sectors has shaped the dynamics of unemployment and wage growth and is likely to continue to do so until labor markets have fully returned to normal.


  • AU Mfg PMI declined to 46.9 vs 50.1 prev
  • Germany CPI declined to 0.1% vs 0.2% exp
  • Der Speigel reported "The German government considers a eurozone exit (by Greece) to be almost inevitable if opposition leader Alexis Tsipras leads the government after the election and abandons budgetary discipline and does not repay the country’s debts." Both Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble believe the euro zone has implemented enough reforms since the height of the regional crisis in 2012 to make a potential Greece exit manageable
  • Syriza’s lead narrows further according to new polling numbers; Syriza is holding a 3.1% lead over New Democracy, down from 3.4% in the prior reading.
  • Greek exposures for European banks under coverage stand at ~€5bn of loans, mostly concentrated with French and German banks – CASA in particular with €3.5bn. Greek government bond exposures are immaterial, and lending exposures are also very limited at 0.1-0.9% of group loans. Overall, we see limited direct impact from a Greek exit, should that occur, and the main risk remains the indirect/contagion impact for the periphery. Key for EU banks is the macro impact and bond spreads moves in peripheral countries. JPM
  • Gundlach thinks that the 10yr treasury bond could take out its 2012 low of 1.38%, especially if crude prices continue to fall and accentuate a deflationary environment. Gundlach also thinks that the US GDP will have trouble hitting 3% this year and next. Barron’s


  • Mon: Japan Services PMI, China Services PMI
  • Tue: EU Services PMI, UK Services PMI, US Markit Services PMI, US ISM Non-Mfg,
  • Wed: EU Unemployment, CPI, US ADP Employment, FOMC Minutes, AU Building Approvals
  • Thu: BoE, Jobless Claims, China CPI
  • Fri: US Employment, Canada Employment