A lot of morning stuff

Italian bonds are lower for a 7th straight day but off its lows of the morning after Italy sold 1 yr debt at around 5am. The yield though of the sale was up 70% from the same maturity sold last month. Their 10 yr yield touched 6% but has backed off. The MIB stock index is now down 12% over the 7 day losing streak. EU Finance Ministers meet again today. While the global markets are obviously focused on growing stress on Europe, Q2 earnings, following the awful jobs report on Friday, will be a growing risk for stocks I believe. I look at the comments from MCHP, a diversified semi company who has a nose in many different industrial businesses in addition to tech, who lowered guidance last night. “We are seeing broad-based weakness in our business due to a number of factors.” They do cite the temporary Japan supply issues and the extra ordering in the prior quarter that became a drag on the current one but also said “our consumer business was soft due to poorer global economic conditions including high unemployment, high oil prices and the resulting low consumer confidence. The computing portion of our business was also lower than our expectations as we saw reduced purchases by multiple large customers in this sector.” As we await more on the debt ceiling discussions, US 5 yr CDS is up by 10% to the highest since Feb ’10. The irony is that by raising the ceiling, our credit risk goes even higher. In contrast, the US 10 yr yield is falling to the lowest since Nov ahead of auction’s over the next 3 days. China reported June bank loans rose slightly above expectations as did M2 and FX reserves rose to new record high of $3.2T.

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