S&P does it again. The credit rating agency Downgrades most European banks and the EU itself. This must be really positive, as no more negative news can come out, or?
Head of S&P must be on some good deal to be sending out all these messages to the world.
- S&P PLACES LARGE BANK GROUPS ACROSS EUROZONE ON WATCH NEG
- EUROPEAN UNION’S AAA RATING MAY BE CUT BY S&P
The reaction is a big yawn. SPX comes off 4 points…..
After the latest rallies, the market is feeling increasingly complacent. As we approach the holiday season, liquidity is drying up and people are looking forward to the “slow” Christmas trading. One should not forget though, the problems won’t go away because Santa is coming. If vol continues to be depressed over the coming weeks, it might be a golden opportunity loading up for early 2012 action. Don’t forget, the Vvol is very high indeed, so the theta bleed is not too bad…
Guest Post by Macro Story.
This chart speaks for itself. Investors are not buying at the money puts as measured by the vix nor out of the money puts as measured by the implied volatility skew.
Spiegel on S&P’s warning and Germany.
Angela Merkel and Nicolas Sarkozy seemed to shrug off the warning by American ratings agency Standard and Poor’s that it may remove the top rating for Germany, France and four other AAA countries in the euro zone because of the ever-worsening euro crisis.”What a rating agency does is the responsibility of the rating agency,” Merkel said in response.
Still, the development is being viewed in Berlin as a warning shot ahead of a major euro crisis summit on Thursday and Friday that some are speculating could determine the fate of the currency union.
S&P has warned that a downgrade should be expected if decisive steps aren’t taken at this week’s summit. “Systemic stress in the euro zone has risen in recent weeks and reached such a level that a review of all euro-zone sovereign ratings is warranted,” S&P said in a statement.
The day started out in a strange risk on mood. Well, things have gradually changed during the day. The DAX is trading rather weak. While the US traders were asleep, the DAX was actually in “good” positive territory. After reversing it is now down 3,35% from the highs. That is not bullish price action.
Note how the DAX has given back 50% of the move up created by the central planners. 100 more Dax points, and the effect everybody cheered will be gone….
After the initial rally (we still can’t figure out why), all futures have traded down, and are now at intra day support levels. News of how the Eurozone will be saved is getting more pathetic by the day. Politicians can’t agree on anything, this should be clear to everybody. Everything is still moving on light volume, although the sell offs show increasing vomlumes. Let’s see if we will start flirting with the levels post the central banks intervention some days ago. We would love to see how the market breaths “down there”. Chart below;
Another dull pre Christmas trading session. The market is trading higher on thin volume. This is an extremely easy market to push around. We saw how quickly SPX moved late yesterday. Vvol, volatility of volatility, is rather extreme, as markets moves easily on no volumes. Dax continuing the underperformance. Chart levels below;
Schroders, one of the UK’s biggest fund managers, is is the latest in a number of international companies to outline its plans to evade the possible worst effects of the eurozone crisis, the FT says.http://ftalphaville.ft.com/thecut/2011/12/07/784281/schroders-braces-for-eurozone-break-up/
A growing belief among investors that the Swiss National Bank will intervene again to weaken its currency sent the franc tumbling against the euro and the dollar on Tuesday, says the FT. Many analysts and traders now think action by the central bank this month is inevitable, http://ftalphaville.ft.com/thecut/2011/12/07/784131/swiss-franc-dives-as-investors-look-for-intervention/
US state attorneys-general stepped up their attacks on large US banks for allegedly illegal home seizures, says the FT, creating further doubt for an industry longing for resolution of mortgage-related litigation. The state of Massachusetts on Tuesday asked the federal government to investigate US taxpayer-owned Ally Financial for allegedly illegal foreclosures,http://ftalphaville.ft.com/thecut/2011/12/07/784141/us-states-ramp-up-illegal-foreclosure-fight/
Goldman Sachs, JPMorgan Chase and other leading international banks may be forced to reveal the pay of their top London-based executives for the first time, as the UK government seeks to tackle what it calls “unacceptable” levels of bonuses in the City, http://ftalphaville.ft.com/thecut/2011/12/07/783961/city-bankers-to-face-pay-pressure/