Apologies G.

# Global share markets fell yet again, the Eurostoxx600 down 0.55% and the S&P500 a similar 0.45%

# Likewise the NZD/USD was again one of the weakest performers sliding to 5 month lows of 0.7625

# The Greek central bank confirmed €700m in deposits has been withdrawn from Greek banks this week (and as a Greek citizen why wouldn’t you take your EUR’s offshore – just in case?)

# Spanish-German bond spreads remain close to their widest levels ahead of tonight’s Spanish bond auction.

# The BoE put GBP squarely in the spotlight with an unattractive mix of numbers. Growth forecasts were lowered and the downside risks to the UK economy played up. At the same time, short-term CPI inflation forecasts were revised up.

# On the positive side for the UK, a large unexpected drop in UK claimant numbers came through (-13.7k vs. -5.4k, expected +5.0k) and unemployment dipped to 8.2% from 8.3%

# US Apr Housing Starts surprised positively at 717k vs. 699k last month (revised from 654k) and, expectations of 680k (note the positive revision of last month – always a good sign)

# US Apr Industrial Output was also better than expected at +1.1% vs expected +0.6%, its biggest monthly jump since December

# US Apr Capacity Utilization 79.2% vs. 78.4% (revised from 78.6%), expected 79.0%

# US Q1 mortgage delinquency rate lowest since Q3 2008 (7.4%)

# FOMC minutes showed that “several” members suggested additional monetary policy accommodation could be necessary if the economy lost momentum”. About half the members believe exceptionally low rates would be appropriate until late 2014

Ahead

# NZ Producer Prices

# Japan Q1 GDP

# Australian MI Inflation Expectations (this number was whacky last time coming in sharply higher above 3%)

# European equity markets again lead the globe lower, the broad Eurostoxx600 fell 0.7% (Greece down 6%, Italy down 2.7%) and the S&P500 fell a similar 0.6%

# The NZD was one of the weakest performers overnight as yesterday’s Statistics NZ revision of 2011 growth from 1.4% to 1.1% weighed. Not only did the Kiwi fall against the USD in line with other currencies but it shed 0.5 cent against the AUD to 0.7740 and hit 6 month lows of 0.4800 against the GBP

# Fonterra’s Milk Prices fell another 6.4%, to be down 24% over the year to date, or 41% below the 2011 peak. Current prices are the lowest since Sept. 2009

# The Eurozone economy managed to escape a return to technical recession. Q1 GDP printed flat, above analyst expectations of -0.2%q/q.

# Greece confirmed that they were heading back to the polls

# IMF head Lagarde (the ex-French Finance minister) said “ECB has room to lower rates/ hope Greece won’t leave Euro “must be technically prepared for anything”.

# Spanish 10 year bond yields soared to 6.35% whilst Italian 10 year yields approached the 6% level which is widely regarded as unsustainable for both countries.

# US Apr Retail Sales eked out small gains coming in at  +0.1% vs expected +0.2%

# US Apr CPI 0.0% vs. +0.3%, as expected

# The US NY Fed Empire State Index made solid gains, jumping to 17.09 against  expected 8.50

Ahead

# Australian WBC Consumer Sentiment

# Australian Wage Price Index

# U.K. Inflation Report

# BoE Governor King speaks

# U.S. Building Permits, Housing Starts, Capacity Utilisation, Industrial Production

# ECB President Draghi speaks

# Global equity markets continued their relentless declines, the Eurostoxx600 down a significant 1.80% and the S&P500 down 1.10%. Bank stocks were the primary drivers in equities as markets priced in an increased probability that the if things start to break apart in Europe the loans these banks have made in EUR may not get paid back .

# EUR picked up the mantle of weakest performer (finally?) as talk amongst European leaders is increasingly shifting towards managing a Greek exit from the EMU. The EUR now trades at 4 month lows.

# Spanish banks borrowed another hefty €264b from the ECB in April after borrowing €228b in March.

# Ratings agency Moody’s said Spain’s support for its banking sector was negative for its sovereign rating.

# The 10-year Spanish bond spreads to German bunds widened to all-time highs of around 475bps.

# On the other side of the ledger demand for ‘safe-haven’ European assets saw yields on UK, Swedish, Finnish, German and Dutch 10-year bonds drop to all-time lows.

# Eurozone industrial production figures were poor coming in at -0.3% vs. +0.4% expected, reinforcing the downbeat mood.

# In the wake of another failed attempt by Greek parties to find consensus and a coalition govt. the tone of EZ ministers’ meeting was terse, the basic message to Greek politicians – don’t expect too many concessions and you’ll get nothing until you form a government that has the support to sign agreements.

# The CRB dropped another 1.4% to one-and-a-half year lows.

# Gold fell to US$1555.00 and is now down for the year.

Ahead

# RBA Minutes of May Meeting

# Japan Consumer Confidence

# Fonterra Milk Price Auction

# Eurozone Flash GDP

# German ZEW survey

# U.S Core CPI and Retail sales

# Empire State Manufacturing Data

Quite an enlightening chart here of the breakdown of the previously highly correlated relationship between U.S. shares (S&P) and commodities (CRB). Since the onset of the GFC the two asset classes have been highly correlated as the FED’s non-traditional monetary policy moves (read – Quantitative Easing programs) supported both. The last 6 months however have seen a distinct breakdown of the relationship.

My fear is that commodities are telling us that all is not well with the world and that equities are going to fall (play catch up).

Anyone out there got a different spin? I’d be interested to hear.

Cheers G.

S&P v CRB – to view chart click here

# Friday’s overnight session saw global stocks markets end the week somewhat mixed. The Eurostoxx600 ended up 0.35% whilst the S&P500 down 0.3%

# Commodities continued to fall with the CRB (global commodity price index) falling another 1% to the lowest level since October.

# The US University of Michigan Consumer Confidence number came in better than expected at 77.8 vs. 76 forecast.

# Greece moved closer to fresh elections as talks between political parties, who are divided over austerity measures, failed to establish a coalition government.

# The slew of Chinese data due Friday was generally weaker than anticipated with below forecast PPI, Imports, Fixed Asset Investment, Industrial Production and Retail Sales

# In a move that would usually bolster risk appetite, China announced a 0.5% cut to their banks RRR (reserve ratio requirements). The move is in effect a form of easing.

For the week

# The calendar is best described as simply busy. Whilst European political machinations are expected to be at the forefront there is plenty of significant data due. NZ quarterly retail sales figures, Australian monetary policy minutes, a raft of U.S. data. and the BoE inflation report.

Ahead

#N.Z. Q1 Retail Sales

# RBA Deputy Gov. Lowe speaks

#European Industrial Production

# Italian 10 year bond auction

Coffee has eked out some excellent technical signals in the last 2 days, rising 4% over that period.  Those that purchased the highly speculative Call options should be excited!

News (source Reuters) - * Market digested Brazil’s official 2012/13 crop estimate, which was lower than many private forecasts – traders.      

    * Brazil’s agriculture ministry said on Thursday it estimated its 2012/13 coffee crop at 50.45 million 60-kg bags, compared with a range of 49 million to 52.3 million bags forecast in December.      

Coffee Daily Chart – click here to view

P.S. It is not too late to get on this trade as we are only returning to levels where the early movers got in.

Regards G.

# Global equity markets stabilised with the broad Eurostoxx600 up 0.55% and the S&P500 up 0.25%.

# Greek stocks rose 4.2% on news from Athens that the  Democratic Left party was considering a 3-way coalition with New Democracy & Pasok.  The market also took positively news the Spanish government will take over struggling Bankia SA.

# The Bank of England left interest rates at 0.50% as expected and also left asset purchases unchanged at £325b.

# UK manufacturing output came in strong at +0.9% m/m vs. -1.1%, +0.5% expected.

# Late news –  the Dow futures market is down 94 points as U.S. investment Bank JP Morgan announced it “had significant mark-to-market losses” since March 31.

Ahead

# China Inflation, PPI, Industrial Production and Retail Sales

# U.S. University of Michigan Consumer Confidence

# The recent declines for global stocks continued with the Eurostoxx600 down another 0.35% and the S&P500 down 0.65%.

# Spain’s IBEX was the worst performer, down 2.77%, as worries continued over the outlook for the Spanish banking system. The move took the index to 8 ½ year lows.

# Further negatively affecting sentiment were fears about Greece’s next aid payments. Fuelling those fears was a statement from the German financial minister who said that “if Greece ends its reforms then no more aid tranches will be paid out”. It certainly appears that Greece’s continued existence in the Eurozone is now also being openly discussed.

# German 10 year bonds plumbed new record lows, trading as lows as 1.50%, before returning to trade at 1.52%. US equivalents dipped intra-night before returning to trade at 1.84%.

# Conversely Spanish 10 years bonds rose above 6.0% sharply widening the ‘risk’ differential between German ‘safe havens’ and the under pressure ‘periphery’.

# The EUR was finally the worst performing currency, after holding up surprisingly well in recent days. The EUR/USD hit 1.2911 the lowest level since Jan 23

Ahead

# NZ PMI

# Australian Employment Change and Unemployment Rate

# China Trade Balance

# U.K. Monetary Policy Statement and Official Bank Rate

# U.S Trade Balance

# U.S. Unemployment Claims

# Fed Chairman Bernanke speaks

# Political turmoil continued to weigh on European equity markets, with the EuroStoxx600 falling a sharp 1.7%.  Clearly the market is fearful of the risks should the EU-IMF forced austerity programs in France and Greece be rejected by the new governments.

# U.S. equity markets fell a smaller 0.5%, with the Dow conceding its fifth straight daily decline.  

# The glow surrounding the news Spain is preparing public monies for bank bailouts faded abruptly with the market having a quick rethink, and as a result, 10-year Spanish government bond yields headed back up towards 6%.

# Global commodity prices also continued to slide – the CRB index fell 0.7% overnight, to be down a sizeable 4.2% for the month to date. The broad basket of NZ commodity prices is down 15-17% from their 2011 highs with dairy the biggest component, down a whopping 35%.

# Oil prices fell for a fifth straight session, marking the largest five-day decline since October.

# Gold finally succumbed to recent USD strength, briefly dropping below US$1600 for the first time in 4 months.

# German industrial production figures were solid, coming in well over market expectations at 2.8%m/m vs. 0.8% expected.

# Australia delivered a budget of massive govt. spending contraction, the biggest in 40 years. The government has pledged a surplus of $1.5bln by June 2013 from a starting point of $44bln deficit. Whilst reaction has been muted so far the move does represent a significant handbrake on the economy going forward.

Ahead

# REINZ NZ House Prices