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CNY IN MACAU: A POST MORTEM

Chinese New Year becoming less of a factor?

 

 

As the following chart shows, there certainly was a traditional pattern of a pre-CNY slowdown followed by a jump in Gross Gaming Revenues during the celebration.  However, we still haven’t gotten the post-CNY slowdown.  It is unclear, how much hold played a role in the recent strength but the historical post-CNY slowdown skipped at least this year.

 

Importantly for Macau, YoY growth has been surprisingly strong, with the exception of the actual CNY weeks.  Growth during those two weeks was only 4% but 24-38% the other 4 weeks presented.  We acknowledge that the comparisons are not perfect but the data is good enough to support our conclusions.  We’d say the data leans bullish for Macau.

 

CNY IN MACAU: A POST MORTEM - chart2


European Banking Monitor: Is the ECB Making Up the Numbers?

Positions in Europe: Short EUR/USD (FXE)

 

The ECB's Security Market Program, or secondary sovereign bond purchasing program, bought a paltry €59 Million in the week ended 2/10 versus a mere €124 Million in the week ended 2/3, and €63 Million in the week ending 1/27 to take the total program to €219.5 Billion. These diminutive figures compare to €2.243 Billion purchased in the week ended 1/17 and many weeks of low to mid single digit buying in the BILLIONS in previous months.  Frankly, we’re surprised that sovereign bond auction demand has been so strong across peripheral countries in the last three weeks -- successfully issuing paper at lower yields (versus previous auctions of similar maturity) -- without the ECB playing a critical role to fill demand.

 

With record levels of money being parked at the ECB’s overnight facility, much of which is a result of the 1st 36 month extension of the LTRO, we wonder just who is filling this sovereign paper demand.  Is the ECB making up the numbers?   We welcome your feedback on the issue.

 

European Banking Monitor: Is the ECB Making Up the Numbers? - 1. SMP

 

 

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".   If you'd like to receive the work of the Financials team or request a trial please email .

 

Euribor-OIS spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone.  The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread tightened by 4.7 bps to 70.9 bps over last Monday.

 

European Banking Monitor: Is the ECB Making Up the Numbers? - 1. euribor

 

ECB Liquidity Recourse to the Deposit Facility – The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.

 

European Banking Monitor: Is the ECB Making Up the Numbers? - 1. ECB

 

European Financials CDS Monitor – Bank swaps were wider in Europe last week for 26 of the 40 reference entities. The median widening was 10.1%.

 

European Banking Monitor: Is the ECB Making Up the Numbers? - 1. banks

 

Matthew Hedrick

Senior Analyst



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MACAU SLOWS LESS THAN EXPECTED

We are increasing our February GGR projection to HK$20.5-21.5 billion, or 6-11% growth YoY, up from our previous forecast of 1-9% growth. 

 

 

Macau generated HK$751 million in table revenue per day in the second week of February versus HK$809 million in the first 5 days.  We would’ve expected a bigger slowdown.  At this point, it is unclear if hold played a role in the better than expected week in Macau.  Remember that February 2012 is a tough month due to the timing of Chinese New Year, partially offset by an easy hold comparison and an extra day this month due to leap year.

 

MACAU SLOWS LESS THAN EXPECTED - ADTR

 

In terms of market share, percentages have moderated after a volatile first week.  SJM is still trending above but much lower than the 34.9% posted last week.  Wynn also moderated downward but is still above trend.  On the other side, MPEL and Galaxy are moving back toward normal share after a hold-induced tough first week.

 

MACAU SLOWS LESS THAN EXPECTED - ADTR2


THE HBM: SBUX, CBOU, WEN, COSI, DNKN, CAKE, RUTH, BWLD, PFCB, KONA

THE HEDGEYE BREAKFAST MONITOR

 

MACRO NOTES

 

Comments from CEO Keith McCullough

 

Consensus continues to clamor for Greek headlines – meanwhile the rest of the world’s globally interconnected risk continues to manifest:

  1. JAPAN – top 3 economy in the world drops to a -2.3% y/y GDP print in Q411 (brutal); now its full throttle game on for the Japanese as we head toward a massive sov debt maturity in March ($745B!). When we were getting hawked up about Italian debt in Feb of 2011, consensus didn’t have it in the area code of its map either. Stay tuned…
  2. FRANCE – alongside covering our SPY short, we covered our French Equity short position on Friday as well. Typically, short-and-hold isn’t what I do. That said, I’m watching the long-term TAIL line of resistance for the CAC of 3556 very closely as I think that’s going to be a good proxy for non-German European growth/inflation for the next few quarters.
  3. OIL – hooo-wah! Big breakout for Brent Oil to $118.28/barrel this morning w/ no immediate-term TRADE resistance to $120ish. If you’re looking for the #1 factor that will slow global consumption growth sequentially here in February (vs what was a big growth ramp in DEC/JAN), the black stuff in the barrel is it.

 

Immediate-term TRADE range for SP500 is now 1338 (where I covered Friday) to 1360. Keep moving out there.

KM

 

SUBSECTOR PERFORMANCE

 

THE HBM: SBUX, CBOU, WEN, COSI, DNKN, CAKE, RUTH, BWLD, PFCB, KONA - subsector

 

 

QUICK SERVICE

 

SBUX: A Starbucks in Athens burned last night as rioters set fire to buildings during unrest following the Greek parliament’s passing of another austerity bill.

 

 

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

 

CBOU, WEN and COSI all led the QSR space on accelerating volume

 

DNKN declined on accelerating volume Friday.

 

 

CASUAL DINING

 

CAKE: Cheesecake Factory is to change its menus at its seven Massachusetts locations to include prices by March 16th, according to the Boston Herald.  A Massachusetts based attorney, Ross Mitchell, threatened to sue the chain for deceptive business practices after receiving a check that exceeded expectations.

 

CAKE: In more bad news for Cheesecake Factory, one of its restaurants in Boise is at the center of a possible Hepatitis A scare, according to local media.

 

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

 

RUTH: Gained 2.7% on accelerating volume following earnings.

 

BWLD: Continues higher, up 1.3% on accelerating volume.

 

PFCB: Down -1.2% on accelerating volume.

 

KONA: Declined -3.7% on accelerating volume.

 

THE HBM: SBUX, CBOU, WEN, COSI, DNKN, CAKE, RUTH, BWLD, PFCB, KONA - stocks

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 


MONDAY MORNING RISK MONITOR: INTERBANK RISK IMPROVES ALONGSIDE EU SOV RISK

* Interbank risk continues to recede -  Euribor-OIS, our preferred measure of systemic risk in the European banking system, tightened 5 bps to 71 bps last week. There is a similar trend occurring in the TED spread, which fell by 3 basis points to 42 bps last week. The next round of LTRO is scheduled for later this month (February 29). This should provide an ongoing tailwind to the interbank market, as it was the last round of LTRO that sparked the move in Euribor-OIS from 98 bps to 71 bps. This should be an ongoing catalyst for reflating the discount at the large-cap US financials. For more details on quantifying that reflation, see our recent notes on the subject. 

 

* Bank CDS was mostly wider in both Europe and America last week, with the notable exception of Greek banks whose spreads tightened.   

 

* Sovereign European CDS were mixed. The most notable takeaway is the ongoing sharp reversal in Portuguese sovereign swaps.  

 

* Bullish Quantitative Set Up - Our firm's Macro quantitative model indicates that there is more updside than downside in the short term (2.9% upside in the XLF vs. 0.3% downside).  

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK IMPROVES ALONGSIDE EU SOV RISK - Summary 

 

Financial Risk Monitor Summary  

• Short-term(WoW): Positive / 4 of 12 improved / 2 out of 12 worsened / 6 of 12 unchanged  

• Intermediate-term(WoW): Positive / 8 of 12 improved / 2 out of 12 worsened / 2 of 12 unchanged  

• Long-term(WoW): Negative / 1 of 12 improved / 7 out of 12 worsened / 4 of 12 unchanged

 

1. US Financials CDS Monitor – Swaps widened for 24 of 27 major domestic financial company reference entities last week.   

Widened the most WoW: JPM, AXP, XL

Tightened the most WoW: RDN, MTG, AGO

Widened the most MoM: MBI, COF, MTG

Tightened the most MoM: AIG, GNW, MS

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK IMPROVES ALONGSIDE EU SOV RISK - CDS  us

 

2. European Financials CDS Monitor – Bank swaps were wider in Europe last week for 26 of the 40 reference entities. The median widening was 10.1%.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK IMPROVES ALONGSIDE EU SOV RISK - CDS  euro

 

3. European Sovereign CDS – European Sovereign Swaps came in mixed last week. Portuguese sovereign swaps tightened by 11.5% (-148 bps to 1136 ) and French sovereign swaps widened by 6.8% (11 bps to 174).

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK IMPROVES ALONGSIDE EU SOV RISK - Sovereign CDS 1

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK IMPROVES ALONGSIDE EU SOV RISK - Sovereign CDS 2

 

4. High Yield (YTM) Monitor – High Yield rates fell 8.0 bps last week, ending the week at 7.37 versus 7.45 the prior week.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK IMPROVES ALONGSIDE EU SOV RISK - High Yield

 

5. Leveraged Loan Index Monitor – The Leveraged Loan Index rose 2 points last week, ending at 1635.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK IMPROVES ALONGSIDE EU SOV RISK - LLI

 

6. TED Spread Monitor – The TED spread fell 3 points last week, ending the week at 42.2 this week versus last week’s print of 45.3.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK IMPROVES ALONGSIDE EU SOV RISK - TED spread

 

7. Journal of Commerce Commodity Price Index – The JOC index rose 3.0 points, ending the week at -9.54 versus -12.5 the prior week.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK IMPROVES ALONGSIDE EU SOV RISK - JOC index

 

8. Euribor-OIS spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread tightened by 4.7bps to 70.9 bps over last Monday.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK IMPROVES ALONGSIDE EU SOV RISK - Euribor OIS

 

9. ECB Liquidity Recourse to the Deposit Facility – The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  


MONDAY MORNING RISK MONITOR: INTERBANK RISK IMPROVES ALONGSIDE EU SOV RISK - ECB liquidity facility

 

10. Markit MCDX Index Monitor – The Markit MCDX is a measure of municipal credit default swaps. We believe this index is a useful indicator of pressure in state and local governments. Markit publishes index values daily on six 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. We track the 14-V1. Last week spreads widened, ending the week at 123 bps versus 121 bps the prior week.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK IMPROVES ALONGSIDE EU SOV RISK - MCDX 2

 

11. Baltic Dry Index – The Baltic Dry Index measures international shipping rates of dry bulk cargo, mostly commodities used for industrial production. Higher demand for such goods, as manifested in higher shipping rates, indicates economic expansion. Last week the index rose 68 points, ending the week at 715 versus 647 the prior week.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK IMPROVES ALONGSIDE EU SOV RISK - Baltic dry

 

12. 2-10 Spread – We track the 2-10 spread as an indicator of bank margin pressure. The 2-10 spread widened to 171 bps, 2 bps wider than a week ago.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK IMPROVES ALONGSIDE EU SOV RISK - 2 10  2

 

13. XLF Macro Quantitative Setup – Our Macro team’s quantitative setup in the XLF shows 2.9% upside to TRADE resistance and 0.2% downside to TRADE support.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK IMPROVES ALONGSIDE EU SOV RISK - XLF macro chart

 

NYSE Margin Debt - December

We publish NYSE Margin Debt every month when it’s released. NYSE Margin debt hit its post-2007 peak in April of 2011 at $320.7 billion. The chart below shows the S&P 500 overlaid against NYSE margin debt going back to 1997. In this chart both the S&P 500 and margin debt have been inflation adjusted (back to 1990 dollar levels), and we’re showing margin debt levels in standard deviations relative to the mean covering the period 1. While this may sound complicated, the message is really quite simple. First, when margin debt gets to 1.5 standard deviations or greater, as it did last April, that has historically been a signal of extreme risk in the equity market - the last two times it did this the equity market lost half its value in the ensuing period. We flagged this for the first time back in May 2011. The second point is that margin debt trends tend to exhibit high degrees of autocorrelation. In other words, the last few months’ change in margin debt is the best predictor of the change we’ll see in the next few months. This is important because it means that margin debt, which retraced back to +0.53 standard deviations in November, still has a long way to go. We would need to see it approach -0.5 to -1.0 standard deviations before the trend runs its course. There’s plenty of room for short/intermediate term reversals within this broader secular move, as we saw in November and December's print of +0.55 and +0.53 standard deviations.  Overall, however, this setup represents a headwind for the market. One limitation of this series is that it is reported on a lag.  The chart shows data through December.

 

MONDAY MORNING RISK MONITOR: INTERBANK RISK IMPROVES ALONGSIDE EU SOV RISK - Margin Debt

 

Joshua Steiner, CFA

 

Allison Kaptur

 

Robert Belsky

 

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