Overnight Summary: Quiet Before The Printing Storm!
- Overnight Summary: Quiet Before The Printing Storm!
by Tyler Durden, www.zerohedge.com
After opening on a very weak note, it was only expected that following some even weaker economic news overnight which continue to confirm the global turn into a sharp recession, futures are doing all they can to remain unchanged, and in some cases are even green as the traditional Pavlovian reaction kicks in: the worse the news, the likelier the intervention. Of course, the market’s dogs are ignoring the fact that right now both gas (never higher on this US day in history) and food prices are surging and the central planners are quite aware of this, not to mention the US presidential election, although at this point nobody really believes that the Fed is impartial so that is a secondary consideration, even as actual fundamentals continue to deteriorate and the spread between cash-flow implied valuations and central bank set risk prices has never been wider. Which brings us to the overnight session, which is slowly picking up in activity but is nothing compared to what will be unleashed tomorrow early in the morning and continuing likely through the end of the year.
For that we go to DB’s Jim Reid
Notwithstanding the improvement in yields in recent days, European leaders continue to put pressure on the ECB to act. Following talks with the Italian Prime Minister in Rome, French President Francois Hollande commented that it ”is the role of those institutions involved in the Eurozone to intervene, notably the European Central Bank”. This was backed by statements from Monti who said he expected EU measures to remove “the serious obstacle of (bond) spreads that have no underlying economic justification”. Indeed, the ECB’s own Jorg Asmussen described the current risk premia for sovereign bonds as reflecting “not only the risk of insolvency of a particular country, but also an exchange rate risk, which theoretically should not exist in a currency union. For a currency union, such systemic doubts are not acceptable”. So the pressure is certainly building in the lead up to tomorrow’s ECB meeting.
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