In the meantime … One-week Euribor – a key measure of shorter-term bank borrowing rates in the money market – has increased from 0.08 percent in January to just below 0.1 percent now; one-month Euribor has risen from 0.1 percent to 0.128 percent and three-month Euribor increased from 0.18 percent to 0.22 percent. These increases in money market rates might not sound like much. But as banks pay back the cheap three-year ECB money – LTRO repayments increased from €137bn at the end of January to €352.9bn last Friday – they pose a threat. If sustained, the rise in money market rates could snuff out economic recovery in more vulnerable parts of the eurozone. Financial Times http://on.ft.com/1gnKlTs
We say all in due time… it’s all about the parties getting their deals inked! What Ted Cruz hears in his head — FIX: OK, let’s start with the question EVERYONE in Washington wants to know: What does Ted Cruz want? Evan Smith: He wants what he says he wants: No more Obamacare, a smaller federal budget, greater personal liberty, power returned to the states — and the obliteration of the establishment-centric D.C. culture. He’s been fairly clear on all of the above, and the fact that he’s unpopular not just among Democrats but his fellow Republicans should tell you something. http://wapo.st/1ffOKZC
Jon Hilsenrath interviewed: Economy Negotiations Inside the Fed Mixed Signals to Markets An inside look at the Fed’s experience over the last five months shows how hard it is for a central bank to communicate about plans that are complicated, conditional and evolving. http://on.wsj.com/15kMLh3
U.S. HOUSE DEMOCRATS SAY THEY WOULD REJECT POSSIBLE REPUBLICAN PLAN TO REQUIRE A NEW NEGOTIATING PANEL TO REDUCE DEFICITS AS PART OF DEBT LIMIT HIKE. Which leads me to ask, I just gotta ask, how do you reject a possible plan before it is on the table? I guess that proves the division within Washington.
Today started with 220k ESZ and 700 SPZ traded on Globex, ESZ trading range was 1662.75 – 1671.50. Monday’s regular trading hours (RTH’s), SPZ pit session trading range was 1667.20 – 1679.20 before settling at 1667.70, down 17.1 handles. In Asia, 9 of 11 markets closed higher: Shanghai Comp. +1.08%, Hang Seng +0.89%, Nikkei +0.30%. In Europe 10 out of 12 markets were trading lower: -0.06%, FTSE -0.70%. It was another low-volume overnight session for the Euro with the range confined to a meager 25 pips. The market continues to be in a holding pattern with the U.S. data blackout, so the Fed minutes tomorrow will be eagerly seized upon for any nugget that might provide near-term direction. Also, [AA], [ADTN], and [YUM] reported post-close, officially kicking off the 3rd quarter earnings season.
Today’s December S&P 500 (SPZ) pit session opened 2 handles higher to 1669.00-1670.00, traded an early high of 1671.00 at 8:55 before stepping sideways to lower throughout the midday, printing 1651.00 at 1:21. The downside price action picked up as Washington headlines and press conferences hit the airwaves. Which leads me to ask, I just gotta ask, why do they schedule press their conferences updating the public if they are not even bothering to negotiate? This only leads to concern, which can and does easily morph into fear … today the VIX, fear gauge, converted 20%, its highest level since printing 21.06 on 6/24/13 as the global equities continued to step lower during the partial shutdown and the debt ceiling showdown.
The SPZ was trading in the 1654 area when the early look of the closing imbalance showed (14:00) MiM – MrTopStep Imbalance Meter showing 80%, $274M to the sell side, followed by 87%, $546M to the sell side at 2:20 as the SPZ traded up to 1657 area. At 2:40 the MiM swelled to 89%, $682M to sell as the SPZ was trading 1655 area. At 2:47 the SPZ was trading in the 1652.50 area when the imbalance showed a moderate $600M to sell. The SPZ printed a new weekly low of 1648.50 at 2:59, the cash close traded 1649.20 area before settling at 1650.40, down 17.3 handles – down 34 handles this week.
Moody’s CEO Raymond McDaniel told CNBC that “It is unlikely that we go past October 17 and fail to raise the debt ceiling, but even if that does happen, then we think that the U.S. Treasury is still going to pay on those Treasury securities.”
U.S. Consumers Falling Behind on Bills after Years of Improvement — The American Bankers Association’s composite delinquency ratio, which tracks eight types of debt including auto and home-equity loans, increased to 1.76% in the second quarter from 1.70% the prior period. Similarly, the delinquency rate on credit cards issued by banks inched up 0.1 percentage point to 2.42%. http://on.wsj.com/1glUNKZ
Is the selling pressure limited to Washington or are earnings — AA kicked off post-close — and the FOMC minutes tomorrow playing an equal role? There are only a handful of independent economic reports that will be posted due to the shutdown – assuming the shutdown stays in effect. The U.S. economic release calendar will be pretty sparse with only initial jobless claims on Thursday 7:30CT & Michigan sentiment on Friday 8:55CT.
Companies Rush to Lower Earnings Bar: A Record Number of Firms Are Giving Negative Guidance Ahead of Third-Quarter Earnings Season, but That May Not Bode Poorly for Stocks on Its Own — You’ve been warned. http://on.wsj.com/18TWTOK Corporate earnings: Barron’s says while the market is distracted by the drama surrounding the government shutdown, it would be wise to pay attention to corporate earnings, for which expectations are low; with help from an improving Europe, U.S. stocks with international exposure could be a bright spot in Q3. earnings pick up in earnest following Friday’s pre-market earnings from [JPM], [WBS] and [WFC].