Jim Van Meerten's  Instablog

Overnight Developments

• June E-mini S&Ps this morning are up 8.25 points (+0.63%) on reduced fears for Greek turmoil as the pro-bailout Greek party New Democracy was ahead in 6 different voter polls released over the weekend. The market is shaking off concerns about the Spanish government's 19 billion euro bailout of Bankia and the government's uncertainty about how it plans to fund that bailout. The Spanish government continues to claim that it needs no bailout and can cover banking losses and regional deficits its own. Commodity prices are mostly higher this morning. Gold is mildly higher by +0.22%, copper is up +0.68%, crude oil is up +0.43%, and grains are mixed. The dollar index is down -0.21% while EUR/USD is slightly lower by -0.04%. T-notes are up 5.5 ticks.
• European stocks are slightly higher this morning by +0.12% following Monday's loss of -0.65%. However, Spanish stocks are down 2.16% this morning and Italian stocks are down -0.43%. Asian stocks today closed higher across the board: Japan +0.74%, Hong Kong +1.35%, China +1.38%, Taiwan +2.89%, Australia +1.14%, Singapore +0.52%, South Korea +1.51%, India +0.13%, Turkey +1.13%.
• In Greece, six polls released over the weekend showed that the New Democracy party is now in first place, which is an improvement over some recent polls showing the anti-bailout Syriza party in the lead. The two main Greek political parties, New Democracy and Pasok, together fell only 2 seats short of forming a majority in parliament in the last election on May 6. If they can improve their seat count in the June 17 elections by at least two seats, then they could from a government that upholds the main tenets of the bailout agreement and keeps Greece in the Eurozone.
• Spain's 10-year bond yield today is little changed at 6.471% after rising by 17 bp to a 5-month high of 6.479% on Monday due to the Bankia situation. That is just 23 bp below the peak of 6.70% posted on November 25, 2011. The Spanish government last Friday announced that Bankia, Spain's third largest bank, would be given a 19 billion euro bailout by the Spanish government. The Spanish government then announced that it may fund the bailout with an IOU from the government rather than cash, leading to worries that the government does not believe it can raise the money in the debt markets. However, a spokesman for the Spanish economy ministry today said that the nation's preferred option for raising the Bankia bailout funds is through the debt markets.
• ECB Council member Ewald Nowotny said today that the ECB is not considering restarting its bond-purchase program, disappointing Spanish Prime Minister Rajoy who last week called for the ECB to buy Spanish bonds after the recent surge in yields.
• China's Xinhua News Agency reported today that the Chinese government has no intention of introducing a large-scale stimulus program. The Chinese finance ministry today announced subsidies for energy-saving products that the government says could spur consumption of of more than 135 billion yuan ($21 billion).
• Italy today successfully sold 8.5 billion euros of 183-day bills at 2.104%, which was up by 33 bp from 1.772% at the last sale on April 26. The bid cover ratio was 1.61 times, down from 1.71 times at the last sale. Market Comments
  • June E-mini S&Ps this morning are up +8.25 points (+0.63%) on the improved position of the pro-bailout New Democracy party in the polls and on slightly higher European stocks today (+0.12%). U.S. stocks on Friday closed mildly lower: S&P 500 -0.22%, Dow Jones -0.60%, Nasdaq 100 -0.17%. The stock market on Friday received some support from the news that the final-May U.S. consumer confidence index from the University of Michigan was revised upward to a +2.9 point gain to a 4-1/2 year high. The S&P 500 index last week consolidated above the 4-month low posted on May 18. The stock market basically has to wait for the June 17 Greek election to better gauge the risk of Greece leaving the Eurozone. The market was encouraged by reports Friday that German Chancellor Merkel will consider a plan for a Eurozone bond redemption fund that would help to pay down debt in troubled Eurozone countries.
  • June 10-year T-notes this morning are up 5.5 ticks as concern continues about whether Spain will need a bailout. T-note prices on Friday closed higher: TYM2 +7, FVM2 +0.75. June 10-year T-note prices last week consolidated near the recent record high on continued safe-haven demand tied to the European debt crisis and on concern about slowing economic growth in China and Europe.
  • The dollar index this morning is mildly lower by 0.176 points (0.21%) due to the higher trade in June E-mini S&Ps. EUR/USD is down -0.0005 while USD/JPY is up 0.05 yen. The dollar index on Friday posted another new 1-2/3 year high and closed slightly higher: Dollar Index +0.06 (+0.06%), EUR/USD -0.0015 (-0.11%), USD/JPY +0.08 (+0.10%). The dollar broke out to a new 1-2/3 year high last week as global portfolio managers dumped European stocks, fixed-income securities, and euros on the likelihood of a showdown between Greek and Eurozone officials after the June 17 election that could deteriorate into Greece's exit from the Eurozone. In addition, 3-month Euribor futures yields have fallen sharply across the futures curve and are mostly trading below 3-month Eurodollar futures yields, giving the dollar an interest rate differential advantage against the euro.
  • July WTI crude oil prices this morning are up 0.39 (+0.43%) and July gasoline is up 1.02 (0.36%) on the lower dollar and some general commodity recovery strength. July crude oil and gasoline prices last Friday closed mildly higher: CLN12 +0.20 (+0.22%), RBN2 +0.0124 (+0.44%). The downward pressure on commodity prices in general eased up later last week as some short-covering emerged. July crude oil prices hit a 6-1/2 month low last Wednesday and moved just slightly higher on Thursday and Friday. Oil prices remain under pressure from the unrelenting rise in U.S. crude oil inventories, the ability of OPEC so far to offset falling Iranian oil production and exports as the July 1 European oil embargo approaches, and the prospects for drawn out talks with the Iranians over their nuclear program that delays any military action into next year.
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    Global Financial Calendar

    Tuesday 5/29/12
    United States
    0745 ET	ICSC (Int'l Council of Shopping Centers) weekly retailer sales.
    0855 ET	Redbook weekly retailer sales.
    0900 ET	Mar S&P-Case-Shiller Composite 20 U.S. home price index expected +0.2% m/m and -2.55% y/y, Apr +0.15% m/m and -3.49% y/y.
    1000 ET	May U.S. consumer confidence (Conference Board) expected +0.3 to 69.5, Apr -0.3 to 69.2.
    1030 ET	May Dallas Fed manufacturing activity expected 1.5, Apr -3.4.
    1100 ET	USDA weekly grain export inspections.
    1130 ET	Weekly T-bill auctions.
    1600 ET	USDA Crop Progress
    1630 ET	API weekly U.S. oil statistics.
    Japan
    0100 ET	Japan May small business confidence, Apr 47.6.
    1915 ET	Japan May Markit/JMMA manufacturing PMI, Apr 50.7.
    Germany
    0200 ET	German Apr import prices expected -0.3% m/m and +2.6% y/y, Mar +0.7% m/m and +3.1% y/y.
    0400 ET	German state May CPI reports. Apr Saxony +0.1% m/m and +2.0% y/y. Apr Brandenburg +0.2% m/m and +2.1% y/y. Apr Hesse +0.2% m/m and +1.9% y/y.
    0600 ET	Bavaria May CPI, Apr +0.3% m/m and +2.2% y/y.
    0800 ET	German May CPI expected -0.1% m/m and +2.1% y/y, Apr +0.2% m/m and +2.1% y/y. German May EU harmonized CPI expected unchanged m/m and +2.2% y/y, Apr +0.1% m/m and +2.2% y/y.
    United Kingdom
    0600 ET	UK May CBI reported sales expected -8, Apr -6.

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