Europe’s ‘Fear Index’ Is Smashing Through The Roof Today

MIKE BIRD

OCT. 16, 2014

Europe’s “fear index,” the VSTOXX index, is going through the roof Thursday morning. The index measures volatility in European markets. It’s the “cousin” of the VIX.

It’s at a two-year high already, and still climbing. It’s up 23.72% already today, dipping above and below 35, after spending basically all of the time since Autumn 2012 below 25.

It’s smashed straight through the 30 mark and is on the climb.

Stoxx, Business Insider

Analysts at Rabobank laid it out for investors in a note this morning (emphasis theirs): 

“Markets seem to be trading as if we are now entering a QE-less world which we currently are… As we’ve argued repeatedly, that translates as ‘welcome to an asset-rich, income-poor world without the asset-rich part’.“

Here’s Europe’s 50 Year Nightmare

JOE WEISENTHAL

 SEP. 12, 2014

BNP Paribas is out with a note about Eurozone titled “The Great Deterioration,” which is a name we think that might really stick.

We’ve been talking a lot about how bad things are in Europe lately. The economy is in the toilet, and political forces are pulling the various countries apart.

But Europe’s problems aren’t exactly new.

In the note, BNP Paribas charts the long decline of Eurozone productivity growth, and the results are really eye-popping.

BNP Paribas

 Italy is the real dog of the bunch, and that’s not surprising, given that they’ve experienced a triple digit recession. But the numbers are on the decline pretty much everywhere, and there’s no obvious reason why the trends would improve.

Europe shares rally on Draghi comments

European shares were higher in morning trade on Monday following a key speech by Mario Draghi, the president of the European Central Bank (ECB), who delivered a dovish tone on Friday, and stressed that more stimulus could be announced soon.

Symbol	Name	Price		Change	%Change	Volume
FTSE	FTSE 100 Index	6775.25		-2.41	-0.04%	571522616
DAX	DAX Index	9435.04		95.87	1.03%	4893886
CAC 40	CAC 40 Index	4287.84		35.04	0.82%	13490683
IBEX 35	IBEX 35 Idx	10579.90		79.70	0.76%	26803176

Draghi speaks

The German DAX and the French CAC were sharply higher on Monday morning, both up around 1 percent, while the U.K.'s FTSE 100 is closed for a bank holiday.

Investors reacted to words by Draghi who, speaking after markets closed on Friday, expressed confidence that the stimulus already announced and a weaker euro would help the euro zone economy, but noted the ECB was ready to do more if needed.

Market watchers widely cheered his comments, with Barclays analysts calling the event a "major breakthrough".

"ECB President Mario Draghi's speech at Jackson Hole last Friday was a major event and marked a turning point in ECB rhetoric. He called for action on both demand- and supply-side policies and urged European governments to deepen fiscal coordination and speed up structural reforms," Philippe Gudin, from the U.K. bank, said in a note late Sunday.

Europe Is A Big Zero

SAM RO

AUG. 14, 2014

@EU_Eurostat

The euro zone (EA 18) is going nowhere.

Growth in the Eurozone has stalled.

The 18-country euro area showed 0.0% GDP growth in Q2, down from 0.2% in Q1 and worse than the 0.1% expected by economists.

This follows disappointing GDP reports from Germany, which declined by 0.2%, and France, which showed no growth.

“The poor figure is chiefly driven by downside surprises in Italy, France and Germany which all failed to grow in the second quarter,” noted Pantheon Macroeconomics’ Claus Vistesen. “On an annualised basis, eurozone growth is now running at a disappointing 0.4% in the first half of this year.”

This follows disappointing inflation reports earlier this week, which showed that price growth remain unusually low in the region.

“Output levels at mid-year suggest the growth forecasts of the European Central Bank’s economists are already overestimating the recovery’s pace,” said Bloomberg economists Maxime Sbaihi and Niraj Shah. “This adds pressure on the central bank to launch an asset purchase program.”

Here’s a breakdown of GDP growth in the region via Eurostat.

Eurostat

STOCKS FALL AFTER BAD NEWS FROM EUROPE: Here’s What You Need To Know

MYLES UDLAND 
 JUL. 11, 2014

REUTERS/Sergei Karpukhin

People surround a clergyman reading a prayer at a temporary tent camp set up for Ukrainian refugees in the town of Novoshakhtinsk in Rostov region near the Ukrainian-Russian border, southern Russia, July 9, 2014.

Stocks fell, but recovered some losses after opening deep in the red on uncertainty out of Europe.

First, the scoreboard:

• Dow: 16,917.92, 67.8, (-0.4%)
• S&P 500:1,964.46, -8.4, (-0.4%)
• Nasdaq:4,395.89, -23.2, (-0.5%)

And now, the top stories of the day:

1) This morning, weekly initial jobless claims fell to 304,000 from 315,000 a week ago. The report was also better than the 315,000 initial claims that was expected by economists. Following the report, Ian Shepherdson at Pantheon Macro said, “In one line: Looks great, but expect volatility over the next four weeks… Sooner or later — presumably next week — the auto shutdowns will hit the claims data, so we have to expect substantial neat-term volatility, though today’s report likely is reasonable reflection of the favorable underlying trend.”

2) The top stock story of the day was CYNK Technology, a $5 billion social networking company that has no revenue, no assets, and just one employee. Shares of CYNK Technology, which trade over the counter, were up better than 25,000% since June 17, and after trading up as much as 30% today, closed down 13%. The company operates a social networking site, IntroBiz.com, which connects members to celebrities, among other people, for free. Though seeing as the company has no revenue, it is unclear what the status of the business is.

3) This morning, stocks in Europe fell, bringing U.S. stock futures down with them, after the parent company of the second-largest bank in Portugal, Banco Espirito Santo, missed debt payments to “a few clients.” Following the news, Bloomberg economists David Powell and Maxime Sbaihi said, “Problems in Portugal’s banking sector appear to have worried investors over the solvency of the country.” Powell and Sbaihi also noted that the public finances of Portugal are among the most fragile in the eurozone. Additionally, both Bloomberg and The Wall Street Journal reported that Spanish bank Banco Popular Espanol postponed a planned debt sale citing, “adverse market conditions.”

4) Also in Europe, industrial production in France fell 3.7% year-over-year, a steeper decline than the 1% drop that was expected by economists. Following the report, Pantheon Macro’s Claus Vistesen said, “We are running out of downbeat adjectives to describe the data in France, with the headline numbers from the French industrial production report truly appalling.” Inflation data in France also disappointed, showing prices increased just 0.5% in June, less than the 0.7% increase in May and the 0.7% increase expected by economists.

5) Italy reported industrial production that fell 1.2% month-over-month in May, putting its economic recovery in doubt. Along with discouraging news out of the Spanish and Portuguese financial sectors, Italy’s poor results put renewed focus on the European periphery, which has seen a tepid recovery since the Eurozone crisis. 

5) In U.S. corporate news, CNBC reported that Marcus Lemonis, the host of CNBC’s “The Profit,” is nearing a deal, along with a group of investors, to buy Crumbs Bake Shop. Shares of Crumbs, which shut its doors Monday, went absolutely bonkers following the news, gaining more than 1,100%. 

6) Lumber Liquidators stock got crushed, falling 21% after the flooring company last night said customer traffic was weaker than expected. Lumber Liquidators became the latest in a series of U.S. corporations to report disappointing results, joining The Container Store and Family Dollar. 

Markets Are Up Across Europe After A Gigantic Day In Japan

Sam Ro

 Feb. 6, 2013

JohnGoode / Flickr

Stock markets are staging a nice rally early in the European trading session, following a 99 point rally in the Dow Jones Industrials and a 3.7 percent surge in Japan's Nikkei.

England's FTSE 100 is up 0.5%.

Germany's Dax is up 0.2%.

Spain's IBEX is up 0.4%.

France's CAC 40 is up 0.2%.

It's a particularly quiet day today with no major U.S. economic news being announced.  Later this morning we'll get a German bond auction.

Tomorrow should be more interesting with an ECB meeting, initial jobless claims in the U.S., and the grilling of incoming Bank of England governor Mark Carney.

Suddenly, There Are Reasons To Worry About Europe Again...

Joe Weisenthal

 Feb. 3, 2013

@daraconn2

A photoshopped image of Spanish PM Mariano Rajoy appearing via teleconference with Angela Merkel

Thanks to the ECB's promise that it will backstop the government bond market, if necessary, the acute financial crisis from the past couple of years is basically over.

But there have always been risks.

For one thing, the economy is horrible, and people can only accept that before so long before society starts to tear apart.

And then there's always been politics, and the worry that these governments will lose the support of the public, and be seen as corrupt.

That's what's going on now.

In Spain, a country that's always been one of the biggest worries, there are calls for PM Mariano Rajoy to resign amid a big corruption bombshell in a Spanish newspaper.

Via Email, economist Frederik Ducrozet of Crédit Agricole explained to Business Insider the overall cause for concern:

It looks bad for Rajoy facing such a massive pressure all of a sudden, mostly because no obvious alternative is available in terms of leadership. This also give Catalunia and other regions a fresh opportunity to contest central policies. And, of course, it happened at a time when activity is still very weak and a risk to fiscal sustainability. Italian politics are getting more unstable. EU cohesion could be more broadly impacted. True, there is always the OMT backstop to cap any sell-off in Bonos but clearly we are approaching the danger zone.

It should be interesting watching Europe again for a bit.

Spain's stock market (the IBEX) dived on Friday amid this scandal, the end of a short-selling ban, and bad bank numbers. There's Italian politics. There's the ongoing bailout of Cyprus. And then there's the ultra-strong Euro ostensibly harming German exporters, who are watching their Japanese competitors enjoy a weakening yen. This week there's an ECB meeting. Should be interesting.

Big Rally Happening In The US And Europe

Joe Weisenthal

 Oct. 15, 2012

Gabby Canonizado 02, Flickr

Risk appetite is seeing an impressive turnaround this morning.

Things had gotten off to a negative start when Asia opened,

 as investors reacted badly to Chinese trade figures which were controversial.

But European investors have a different take on things it seems, 

and gains are being seen everywhere.

Spain is up 0.86%. Italy is up 0.99%.

Peripheral borrowing costs are down again.

US futures are higher.

Markets Are Down In Europe, Italy Drops 1%

Sam Ro

 Sep. 13, 2012

Flickr / gagagah

Markets are mixed in the European trading session.

England's FTSE 100 is up 0.1%.

France's CAC 40 is down 0.8%.

Germany's DAX is down 0.3%.

Spain's IBEX is down 1.0%.

Italy's FTSE MIB is down 0.8%.

U.S. futures are also down modestly.

Basically, everyone is on hold as they await the Federal Reserve's latest monetary policy decision.  The two-day Federal Open Market Committee (FOMC) meeting wraps up today.  Economists expect the Fed to announce additional easy monetary policy through additional quantitative easing and an extension of its low rate guidance into 2015.

Europe Must Become Federation of States: EU's Barroso

Published: Wednesday, 12 Sep 2012 | 5:44 AM ET

European Commission President Jose Manuel Barroso called for more European integration to help tackle the euro zone debt crisis in his State of the Union speech on Wednesday through the creation of a “federation of nation states”.

ChinaFotoPress | Getty Images Jose Manuel Durao Barroso, President of the European Commission

"I call for a federation of nation states. Not a superstate. A democratic federation of nation states that can tackle our common problems, through the sharing of sovereignty in a way that each country and its citizens are better equipped to control their own destiny,” Barroso said.

He added that the creation of such a federation would ultimately require a new treaty.

The Commission will present ideas for changes to the existing treaty before 2014, he said.

In his speech, Barroso called for a full fiscal union and was critical of member states who did not fully support decisions taken to stem the debt crisis.

“On too many occasions we have seen a vicious spiral. First very important decisions for our future are taken at European summits, but then the next day we see some of those very same people who took those decisions undermining them,” he said.

Karsten Schroeder, CEO of Amplitude Capital told CNBC, Barroso was “probably right” in calling for more integration to save the euro and fix the debt crisis.

“When you see the comments from the U.S. and from Asia it’s the same direction – they want to see Europe operate as one big ship. Because what’s happening now is not only posing a big threat to the European economy but to the global economy, if we see a very uncoordinated disintegration of the euro [EUR=X  1.2881    0.0027  (+0.21%)   ] ,” he said.

“So I think given the situation we’re in, we need more European leadership, we need more power to the central European organizations, otherwise we cannot solve this crisis,” he said.

“Brussels needs more power. You can see that with the ECB (European Central Bank) how they’ve clearly taken over a lot of power from the local central banks. I think that’s what we have to see on multiple levels. When it comes to fiscal policy we need a much higher level of integration within Europe,” Schroeder said.

In his speech, Barroso also outlined proposals to move towards a European banking union under which the ECB would monitor all euro zone banks.

"This new system, with the European Central Bank at the core and involving national supervisors, will restore confidence in the supervision of all banks in the euro area," Barroso said in a statement released by the European Commission.

"We want to break the vicious link between sovereigns and their banks. In the future, bankers' losses should no longer become the people's debt, putting into doubt the financial stability of whole countries."

Barroso want the European supervisor in place by the start of next year.

Tom Elliott, global strategist at JPMorgan told CNBC: “An EU banking union is necessary to solve the euro crisis. (…) It will lower the risks of having to deal with another type of systemic failure in the banking system.”

SocGen Presents 5 Key Clues On What's About To Happen In Europe

Joe Weisenthal

Wikimedia Commons

SocGen economist Michala Marcussen has a fantastic note out this morning putting together some of the puzzle pieces to figure out what's going to happen next in Europe.

First, Marcussen sets the scene: There's hype ahead of the September 6 meeting. There are all kinds of pre-meetings planned. Rumors are flying in the press.

Suspense is mounting ahead of the 6 September ECB meeting where markets hope to see the modalities of the new non-standard measures unveiled. Press is rife with debate on the possibilities and, on Monday, Italian Industry Minister Passera criticised an excess of "incoherent and
disruptive communications which have also disturbed markets." One message is clear and consistent, however, there will be further risk sharing in the euro area, but NOT without conditionality. Conditionality is a political process and will take time, a conclusion that is entirely consistent
with steeper peripheral yield curves.

Euro-area crisis resolution talks are still ongoing at both the ECB and amongst European leaders. Chancellor Merkel is due to meet President Hollande on 23 August, Prime Minister Samaras on 24 August, Prime Minister Monti on 29 August and Prime Minister Rajoy on 6 September – coincidentally the same day that markets hope the ECB will unveil the modalities of the new non-standard measures announced by President Draghi at the 2 August ECB meeting.

In our opinion, there is today no final blueprint ready. The Bundesbank’s Monthly Report (released Monday) offered some new clues, however. Weighing these along with other available evidence, several points stand out.

Marcussen then lays out 5 points, which we shall summarize:

• Conditionality is key. There's no way that countries are going to get major aid without submitting to conditions on budgets and oversight. This the Germans have always been clear on...
• The ECB will only target shorter maturies. This Draghi has made clear, and it is consistent with the notion of conditionality.
• ECB bond buying could be unlimited. Draghi hinted at this, and even the Bundesbank acknowledged this.
• Risk sharing is not risk elimination. There is always risk, even in Germany.
• The Bundesbank still doesn't like bond buying.

So the blueprint isn't there yet, but a lot of hints are coming.

Pay close attention to the upcoming meetings between the various leaders: Monti, Hollande, Rajoy, Merkel. That's where a lot of political work will happen to grease the wheels for the ECB.

Finally, Marcussen believes that all of this is consistent with the latest "bull steeping" in the European peripheral bond markets, whereby yields are coming down everywhere, but doing so a lot faster at the short end, while still remaining quite elevated at the long end.

Europe's Trade Surplus Is Booming

Bloomberg

Aug. 17, 2012

Aug. 17 (Bloomberg) -- Euro-area exports rose for a second month in June, driven by a surge in shipments from Germany, as companies tapped into emerging markets to offset declining demand at home.

Exports from the 17-nation currency bloc advanced a seasonally adjusted 2.4 percent from May, when they gained 0.4 percent, the European Union’s statistics office in Luxembourg said today. Imports stagnated in the period and the trade surplus widened to 10.5 billion euros ($13 billion) from 6.8 billion euros.

Europe’s economy contracted 0.2 percent in the second quarter as tougher austerity measures pushed at least six member states including Italy and Spain into recession. With households and companies across the region cutting spending, exporters such as L’Oreal SA, the world’s largest cosmetics maker, have relied on faster-growing Asian markets to bolster sales.

“The euro-region economy is undergoing a mild recession,” said Alexander Krueger, chief economist at Bankhaus Lampe KG in Dusseldorf. “The global growth dynamic has eased somewhat, but exports will continue to support development to a certain extent in the second half of the year.”

German exports jumped 6.6 percent in June to 40.9 billion euros, while imports in Europe’s largest economy rose 1.5 percent. Shipments from Italy increased 2 percent in the period. France and Spain reported gains of 1 percent and 1.4 percent, respectively.

Exports to U.S.

The euro economy may shrink 0.2 in the third quarter before returning to growth in the final three months of the year, according to the median forecast in a Bloomberg News survey of 20 economists. The euro has depreciated about 2.7 percent against the dollar in the past three months as the region’s turmoil worsened, making exports cheaper. The single currency extended gains after today’s data were released and traded at $1.2377 at 11:15 a.m. in Frankfurt.

Exports to the U.S. rose a non-seasonally adjusted 11 percent in the first five months from a year earlier, while shipments to the U.K. increased 7 percent, today’s report showed. Exports to China and Russia surged 8 percent and 16 percent, respectively, while Japan shipments climbed 13 percent. Detailed trade data are published with a one-month lag.

L’Oreal, based in Paris, reported on July 26 that second- quarter sales beat analysts’ estimates, helped by demand in Asia, Africa and the Middle East. Bayerische Motoren Werke AG, the world’s largest maker of luxury cars, is extending its global reach by expanding capacity in the U.S. and China.

China’s Slowdown

More than a decade after a financial crisis rocked Asia, the trend growth rates of Indonesia and its neighbors are rising as governments boost spending and companies invest to tap younger workforces. Southeast Asia is proving resilient to Europe’s debt crisis and China’s slowdown, with Philippine and Malaysian expansion surpassing estimates and Thai growth forecast to accelerate.

Indonesia’s government will increase capital spending by 15 percent next year, joining Southeast Asian nations that are upgrading infrastructure to woo investment. Outlays will rise to 193.8 trillion rupiah ($20 billion) in 2013, President Susilo Bambang Yudhoyono said in Jakarta yesterday.

In the U.S., a jobless rate that has topped 8 percent for 42 months is masking the biggest pickup in worker pay in more than five years. July retail sales that exceeded estimates indicate consumers may be starting to spend more of that money.

‘High Government Debt’

The BGOV Barometer shows inflation-adjusted employee compensation grew at a 4.4 percent annual pace from January through June, the biggest six-month gain since March 2007, according to Commerce Department figures. The Barometer also shows retail sales last month rose a surprising 0.8 percent, the largest advance since February and the first in four months.

Still, “global economic conditions might deteriorate in the face of the euro crisis and high government debt,” BMW Chief Executive Officer Norbert Reithofer said on Aug. 1. The Munich-based company on that day reported its first drop in quarterly operating profit in almost three years.

Adding to signs the economic slump is spreading from the euro region’s periphery nations to the core, German investor confidence unexpectedly fell for a fourth straight month in August. Germany’s executives also grew more pessimistic in July and French manufacturing continued to shrink last month.

Markit Economics in London is scheduled to release an initial estimate of a composite index for euro-area services and manufacturing output for August on Aug. 23. The EU statistics office will publish a breakdown of second-quarter gross domestic product next month.

--With assistance from Mark Evans in London, Shamim Adam in Singapore, Novrida Manurung in Jakarta and Shobhana Chandra in Washington. Editors: Patrick G. Henry, Fergal O’Brien

To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

Europe's Most Important Chart Is Looking Super Optimistic Right Now

Simone Foxman

 34 minutes ago

We have mentioned before that yields on Spanish (and Italian) bonds that mature before the European Central Bank's three-year LTROs expire are the most important indicators of angst or strength in Europe.

Spanish banks have higher incentive to purchase bonds that mature in this time period because they have cheap money from the ECB to do so.

Turns out that the yields on Spanish two-year bonds are falling dramatically this morning, despite the initial negative reaction to ECB President Mario Draghi's refusal to take immediate action to address the crisis at a press conference yesterday.

He did, however, say that the CB was looking to target the short end of the yield curve on sovereign debt, implicitly committing to future bond-buying action in the shorter term.

Yields on Spanish 2-year bonds appear to have reacted to these statements. They fell about 11 basis points yesterday and are down 34 basis points today. Check out those yields in the last few hours:

Bloomberg

Markets Are Tumbling In Europe

Joe Weisenthal

 Jul. 4, 2012

YouTube

Happy July 4! Markets are tumbling in Europe!

It's going to be a quiet day because of the lack of US trading, but let's be honest, the European market is the only market that really matters, and it's down.

Italy is off 1%.

Spain is off about 0.5%

Germany is modestly lower.

There have been a string of mostly negative (but expected) service PMI reports, although Germany's did dip below 50.

Other than that, the world awaits the ECB tomorrow.

Markets Are Falling In Europe After Yesterday's Market Mayhem

Joe Weisenthal

 Jun. 22, 2012

Wikimedia Commons

Today is off to a slightly more subdues start than yesterday, but we're seeing deeper losses in Europe, as markets catch up to the US, where the Dow los 250 points yesterday.

The big loser of the day: Germany.

The DAX is off over 1.1% following a weak reading of the IFO business confidence index.

Italy's FTSE MIB is off 0.6% following a bad consumer confidence number.

Meanwhile overnight, Hong Kong stocks fell 1.33% and Japan lost 0.3%.

Oil Is Tanking, US Futures Are Falling, And Europe Is Getting Smoked Again

Joe Weisenthal

 Jun. 21, 2012in

Flickr / pierpaolop

Looks like another rough morning.

After a weak Chinese Flash PMI and a series of clearly contractionary European flash PMIs, everything is lower today.

Crude oil is about to drop below $80.

US futures are down about 0.5%.

Gold is below $1600

And Europe is getting smoked. The Spanish market is down 1.6%. Italy is off 0.6%. Germany is down 0.9%.

So basically we're seeing a combination of weak data, and perhaps some global reaction to yesterday's Fed, which may have been a tad more hawkish than expectations.