Crude

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SemGroup in 2008 and the London Whale in 2012 have given the people a blueprint to kill JP Morgan's alleged massive manipulative position in the silver market.

Equity markets have traded with moderate volatility so far today as peripheral news concerning Spain and Italy continues to be keenly watched by market participants. Overnight the Italian PM Mario Monti said he does not see any need for a bailout either now or in the future with the Italian and Spanish 10yr yields seen off their highs yesterday, lower by 9.8bps and 7.6bps respectively. On a sector breakdown tobacco stocks saw some slight support after US firm Philip Morris announced a new USD 18bln 3yr share buyback program, however, industrials have lagged as a whole following a profit warning from Swedish firm SKF. In terms of fixed income, the bund has continued yesterday's slide with the Bundesbank coming to market with a July 2022 tap. In initial reaction to the results, bunds saw a 20 tick spike higher, off session lows, following what was perceived to have been a "smooth" auction despite some concerns about the eventual credit worthiness of Germany given the recent bailout of the peripheral nations. Meanwhile, the long end of the EUR curve steepened in early trade as reports from the Danish government who have agreed to change the discount rate that pension funds estimate liabilities being noted. In FX, EUR/USD trades higher into the N.American cross-over with an Asian sovereign name being a touted buyer this morning. In other news the AUD also caught a bid shortly after comments from the German central bank who said that they are considering buying the antipodean currency.

All you can read.

All you need to know.

• J.P. Morgan Knew of Risks: Warning Flags Raised Two Years Ago About CIO (WSJ)
• Cyprus Poised to Seek Bailout within Days (FT)
• U.S. Exempts India, South Korea From Iran Oil Sanctions (Bloomberg) - so those countries who need Iran crude?
• Barroso Pushes EU Banking Union (FT)
• Hollande Set for Poll Victory (FT)
• Fed Says U.S. Wealth Fell 38.8% in 2007-2010 on Housing (Bloomberg)
• Fed Officials Amplify Concerns over Europe (Reuters)
• Fed's Lockhart Says Lower Yields Bolster Case for No New Action (Bloomberg)

We already know that Chinese imports of HK gold passed all records in the month of April. It appears that the precious metal is not the only hard asset that China has set its sights on.

European equities in both the futures and the cash markets are making significant gains after a mornings’ trade, with financials, particularly in the periphery, leading the way higher following the weekend reports of the Eurogroup confirming aid for the Spanish banking sector. With data remaining light throughout the day, its likely investors will remain focused on the macro-picture, seeing some relief as the Spanish financials look to be recapitalized. At the open, risk sentiment was clear, with EUR/USD opening in the mid-1.2600’s, and peripheral government bond yield spreads against the German bund significantly tighter. In the past few hours, these positions have unwound somewhat, with EUR/USD breaking comfortably back below 1.2600 and the Spanish 10-yr yield spread moving through unchanged and on a widening trend across the last hour or so against its German counterpart, and the yield failing to break below the 6% mark.

After hitting overnight highs of 1.2670, the EURUSD has wiped out nearly all of its gains following the Spanish "bailout", and was last trading just +40 pips higher compared to the Friday close. Same thing with Spanish bonds: these reacted favorably initially, but slowly the bondholder realization that they just got primed has settled in, and with sovereign CDS still a questionable hedge courtesy of ISDA, the only real hedge is selling, and have now drifted wider on the day, as have Italian bonds following a Bloomberg piece which notes the patently obvious: Italy Moves Into Debt-Crisis Crosshairs After Spain. Expect US stocks, always last to get the memo, to realize that Europe has not only faded the entire move, but is now appreciating it for what it is: a confirmation of failure.

All you need to read and some more.

You can’t watch the mainstream media propaganda channels for more than ten minutes without a talking head breathlessly announcing that gas prices have dropped for the 24th day in a row and are now back to $3.55 a gallon. Wall Street oil analysts, who are paid hundreds of thousands of dollars per year to tell us why prices rose or fell after the fact, are paraded on CNBC to proclaim the huge consumer windfall from the drop in price. This is just another episode of a never ending reality show, designed to keep the average American sedated so they’ll continue to spend money they don’t have buying crap they don’t need. The brainless twits that pass for journalists in the corporate mainstream media never give the viewer or reader any historical context to judge the true impact of the price increase or decrease. The government agencies promoting the storyline of those in power extrapolate the current trend and ignore the basic facts of supply, demand, price and peak oil. The EIA is now predicting further drops in prices. Two months ago they predicted steadily rising prices through the summer. What would we do without these government drones guiding us?

That economic data out of Europe was disappointing overnight should come as no surprise to anyone. That Spain is broke, and there is no money to bail it out under the existing framework (and that Germany is unwilling to come up with a new bailout scheme), should also be no surprise. And yet they somehow manage to stun the market... each and every day. Which is why overnight action has now boiled down to a simple algorithmic exercise: is there a short covering squeeze: if yes, then rip, aka Risk On. If not, then Risk Off. So far, the squeeze has not been initiated which is also to be expected, following the biggest short covering squeeze in up to two years. This too may change if repo desks decide to pull borrow as they tend to do during regular hours, to give the impression that the latest and greatest bailout plan is "working." And in other news, which is completely irrelevant, here is the actual news.

• Obama Seeking Ally on Europe Finds Merkel a Tough Sell (Bloomberg) - but he has an election to win
• China rate cut sparks fears of grim May data (Reuters)
• China faces stimulus dilemma  (FT)
• Papademos warns of Grexit vortex (FT)
• China’s Shipyards Fail to Win Orders as Greek Owners Shun Loans (Bloomberg)
• Rajoy Holds Bank Talks With EU Leaders as Fitch Downgrades Spain (Bloomberg)
• Capital Rule Is One Size Fits All (WSJ)... now the modest question of where to get the $3.9 trillion in capital
• Merkel Pokes at Cameron With Backing for Two-Speed Europe (Bloomberg)
• City safeguards set Britain at odds with EU (FT)
• Bernanke says Fed to act if Europe crisis deepens (Reuters)

All you need to read.

Central bank gold demand remains robust as central banks continue to diversify out of the euro and the dollar. Further central bank demand is confirmed in the news this morning that Kazakhstan plans to raise the share of gold in its international reserves from 12% to 15%. So announced central bank Deputy Chairman Bisengaly Tadzhiyakov to reporters today in the capital, Astana. “We’ve already signed contracts for 22 tons,” Tadzhiyakov said. Bloomberg report that immediate-delivery gold was little changed at $1.620.41 an ounce at 10:50 a.m. in Moscow, valuing 22 metric tons of gold at about $1.2 billion. “The bank is ready to buy when suppliers are ready to sell,” Tadzhiyakov said. Kazakhstan said yesterday it will cut its holdings in the euro by a sixth. It was reported in the Reuters Global Gold Forum that the central bank buys all the gold produced in Kazakhstan and owned 98.19T at the end of April, according to the IMF's most recent international finance statistics report. Meanwhile, supply issues remain and South African gold production continues to plummet. South African gold production fell 12.8% in April from a year earlier, Juan -Pierre Terblanche, a spokesman for Statistics South Africa, told Bloomberg.