Glencore

European equities are seen modestly higher at the midpoint of the European session, with the utilities and financials sectors leading the way higher. As such, the Bund is seen lower by around 40 ticks at the North American crossover. The closely-watched Spanish 10-yr government bond yield is seen lower on the day, trading at 6.85% last, as such, the spread between the peripheral 10-yr yields and their German counterpart has been seen tighter throughout the European morning. Issuance of 6-month bills from the Italian treasury passed by smoothly, selling EUR 9bln with a higher yield, but not an increase comparable with yesterday’s auction from the Spanish treasury. The decent selling from Italy today may pave the way for tomorrow’s issuance of 5- and 10-year bonds, which will be closely watched across the asset classes. Data of note has come from Germany, with the state CPIs coming in slightly higher than the previous readings, proving supportive for the expectation of national CPI to come in flat at 0.0% over the last month.

• France to Lift Minimum Wage in Bid to Rev Up Economy (WSJ)... weeks after it cut the retirement age
• Merkel Urged to Back Euro Crisis Measures (FT)
• Monti lashes out at Germany ahead of summit (FT)
• Italy Official Seeks Culture Shift in New Law (WSJ)
• Migrant workers and locals clash in China town (BBC)
• Romney Would Get Tough on China (Reuters)
• Bank downgrades trigger billions in collateral calls (IFRE)
• Gold Drops as US Data, China Speculation Temper Europe (Bloomberg)

• Mario Monti: We Have a Week to Save the Eurozone (Guardian)
• Europe Central Bank Prepares to Relax Collateral Rules (WSJ)
• EU Banks' Risk in Eyes of Beholder: Worry Is That Lenders Are Boosting Gauge of Their Health (WSJ)
• Europe finally learns about subordination: Bailouts' Creditor Hierarchy Scares Private Bondholders (WSJ)
• Merkel Isolated in Race for Euro Crisis Solution (Spiegel)
• Fed’s Re-Twist May Lift Treasury Repurchase Agreement Rates (Bloomberg)
• China Said to Propose Keeping Limit on Local Government Loans (Bloomberg)
• Moody’s Downgrade Hits 15 Top Banks (FT)
• IMF Challenges Berlin’s Crisis Response (FT)
• Colombia to Auction Rights in 2013 to Gold and Coal, Not Coltan (Bloomberg)

• Merkel Prepares to Strike Back Against Hollande (Spiegel)
• China to subsidise vehicle buyers in rural areas (Reuters) - what could possibly go wrong
• Bankia’s Writedowns Cast Doubts on Spain’s Bank Estimates (Bloomberg) - unpossible, they never lie
• Shares in Spain's Bankia plunge on bailout plan (AP) - oh so that's what happens when a bank is bailed out.
• SNB’s Jordan Says Capital Controls Among Possible Moves (Bloomberg)
• Greeks Furious Over Harsh Words from IMF and Germany (Spiegel)
• Tehran defiant on nuclear programme (FT)
• Finally they are getting it: Greece needs to go to the brink (Breaking Views) - of course, Citi said it a week ago, but it is the MSM...
• OTC derivatives frontloading raises stability concerns (IFRE)
• Wall Street Titans Outearned by Media Czars (Bloomberg)

Peripheral stock indices underperformed in early trade, with banks under considerable selling pressure amid renewed tensions in credit markets. Wave after wave of poor data from the European PMIs and the German IFOs placed shares under further pressure and talk of macro names selling EUR/USD weighed on the pair. As a result, in the fixed income space, the German 2/5 spread traded at levels not seen since December 2008. However as the session progressed, stocks staged a decent recovery, which coincided with unconfirmed market talk of an asset reallocation trade, together with talk of Asian real money accounts buying French OATs, which in turn prompted sharp tightening in FR/GE 10y bond yield spread. This also supported EUR/USD, which after coming close to making a test on the 1.2500 barrier is now trading little changed. In other news, the ONS reported that the UK economy shrank by 0.3% in the first three months of the year, more than previously thought. The downward revision was due to a bigger contraction in construction output than previously estimated. Despite this, FTSE in the cash has persisted, and is the strongest performing index in Europe today.

Following the morning in Europe, a generally risk-off tone is observed, with stock futures sitting just above session lows and the German Schatz auction resulting in record low yields. Some of the risk-averse moves were noted following unconfirmed market talk that a troubled Dutch housing association may be pressed towards bankruptcy, however this seems to be linked towards an article concerning the Dutch central bank probing into the sale of derivatives to the housing group Vestia. Nonetheless, the long end of the Dutch curve remains well-bid and European 10-yr government bond yield spreads are seen generally wider across the board. Releases from the UK have come under particular focus; the BoE minutes showed an alongside-expectations vote of 8-1 to keep QE on hold. With some analysts estimating more of a lean towards further asset purchases, the initial reaction was strength in the GBP currency, but countering this effect was the parallel release of UK retail sales, with the monthly reading showing the sharpest decline since January 2010. Additionally, it was noted that several members of the board saw further QE as a finely balanced decision, placing GBP/USD back on a downward trajectory and briefly below 1.5700. Elsewhere in foreign exchange, current sentiment is reflected in EUR/USD, printing multi-month lows earlier in the session of 1.2615, with the USD index at 20-month highs which in turn has weighed on commodities.

All you need to read.

European equities are seen lower across the board with the exception of the CAC-40 index as markets remain nervous towards the prospect of a second wave of Greek general elections. The outperformance of the CAC-40 follows the news from oil major Total, who have stemmed the gas leak from their Elgin well successfully after conducting intervention. As such, Total are seen higher by over 2%, strongly above the Oil & Gas sector. The Bank of England have released their latest projections for the UK economy, revising lower their growth forecasts and higher their near-term inflation expectations, alongside analyst forecasts. The BoE have stuck to their long-term predictions that there will be a slow but steady return to recovery, but reiterated that major downside risks exist from Europe. Governor King’s subsequent press conference has shown him to remain somewhat dovish, commenting that an increase in downside risks would prompt the bank to commit to further actions, leaving the door to a boost in asset purchases open. The forecast revisions prompted a sharp move lower in GBP/USD, falling around 75 pips and Gilt futures moving 55 ticks to the upside after the opening comments. At the midpoint of the session, GBP/USD remains in negative territory despite seeing support before the inflation report after better than expected UK jobless claims data.

• China Industrial Output Growth Slows Sharply In April (WSJ)
• Indian industrial output shrinks unexpectedly (AFP)
• China’s Inflation Moderates, Adding Room for Easing (Bloomberg)... a nickel for every "imminent RRR-cut" prediction
• Drew Built 30-Year JPMorgan Career Embracing Risk (Bloomberg)
• Spain Offered Time to Curb Deficit (FT)
• France Entrepreneurs Flee From Hollande Wealth Rejection (BBG)
• Venizelos Eyes Unity Deal After Agreement With Democratic Left (Ekathimerini)
• Berlin Reaches Out to the Periphery (FT)
• Bernanke Speaks About Risks From End of Pro-Growth Plans (Bloomberg)

European equities continue the trend of the week as they move lower throughout the morning session, as no news is bad news from Greece. In the early hours of the session, reports from German press revealed that the Troika have cancelled their May mission to the country, on the grounds that the current political instability could derail the rescue effort. The continued risk-aversion in Europe is evident in the strong demand for both German and British securities, as both countries sell strongly in their respective auctions. As such, the German Bund contract has hit on all time highs several times in the session today and the Spanish yield on their 10-yr government bond remains elevated above the 6.00% mark. Overnight source comments speculated that the Spanish government are pressing their national banks to set aside between EUR 20-40bln in funds for bad loan provisions and capital buffers. The reports have weighed down on the IBEX 35 throughout the morning, which is currently severely underperforming its European counterparts.

• Borrowers Face Big Delays in Refinancing Mortgages (WSJ)
• Greek left attacks ‘barbarous’ austerity (FT)
• Would-be suicide bomber was U.S. informant (Reuters)
• Cameron says Euro needs single government: report (Reuters)
• Demonstrators targeting BofA annual meeting (Reuters)
• Moody’s Bank Downgrades Risk Choking European Recovery (Bloomberg)
• Lehman E-Mails Show Wall Street Arrogance Led to the Fall (Bloomberg)
• What Hollande must tell Germany (Martin Wolf) (FT)
• Why France Has So Many 49-Employee Companies (BusinessWeek)

• European Unemployment Rate Rises to Highest in Almost 15 Years (Bloomberg)
• Chinese Activist Leaves U.S. Embassy (WSJ)
• China April bank loans slide 30 pct from March-paper (Reuters)
• Moody's warns against lack of tax hike in Japan (Reuters)
• RIM CEO Bets on BlackBerry Without Keyboard to Challenge Apple (Bloomberg)
• European visits focus on boosting trade (China Daily)
• Martin Wolf- After the bonfire of the verities (FT)
• German Jobless Unexpectedly Up in April as Crisis Flared (Bloomberg)
• Romney Refuses to See China Progress on Yuan (Bloomberg)
• Bolivia Following Argentine Takeover Deepens Regional Divide (Bloomberg)
• Plosser Says Fed Must Guard Against Long-Term Inflation (Bloomberg)

All you need to read and some more.

Six centuries ago, when London and Paris were irrelevant, plague-infested backwaters, and New York City wasn’t even on the map, the greatest city in the world was Nanjing– the capital of the Great Ming. At the time, Nanjing was not only the most populous city on the planet, it was also the pinnacle of civilization. Art, science, technology, and commerce flourished in the Ming Dynasty’s liberalized economy, which constituted a full 31% of global GDP at the time. (By comparison, the US economy is roughly 25% of global GDP today…) Taxes were low, the currency was strong, and overseas trade thrived. For a time, Nanjing truly was the center of the world. Over the next several hundred years, the tide shifted. The Ming Dynasty fell, and power was transferred further west to the Ottoman Empire, and eventually to Europe which had finally emerged from the Dark Ages as the most advanced civilization on Earth... This phenomenon has lasted for several hundred years now… but as history has shown repeatedly, power centers frequently shift. The world is now witnessing yet another transition of power, this time from west to east, as the US-led western hierarchy suffocates within its own debt-laden Keynesian fiat bubble.

All you need to read and more.