Israel

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.

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Because Banning Propaganda “Ties the Hands of America’s Diplomatic Officials, Military, and Others by Inhibiting Our Ability to Effectively Communicate In a Credible Way”

At the beginning of the week, European equities are seen modestly higher in the major indices with underperformance noted in the peripheral markets. Markets have sought some solace in the G8 summit over the weekend, with leaders agreeing that the optimal scenario would be Greece remaining within the European Monetary Union, and have furtively agreed that further measures may be necessary to return Europe to growth. The disagreements, however, continue to rollover as leaders fail to commit to a specific growth strategy. The tentative risk sentiment is reflected in the fixed income markets, with the German Bund remaining in negative territory for much of the session and 10yr government bond yield spread between the periphery and the German benchmark tighter on the session. Touted bids by domestic accounts helped support BTPs (Italian paper), especially in the short end of the curve, where the spread between the German equivalent is trading tighter by around 3bps. From Tokyo, comments from Fed’s Lockhart have drawn attention, who commented that with the downside risks emerging from the Eurozone, it would be unwise to take QE3 off the table.

European cash equities are in the red across the board at the midway point, as the bourses fail to reverse the trend of the past few sessions. With data points very light today, participants continue to focus on the macroeconomic themes as speculation regarding a Greek exit maintains focus. A medium-term maturity Spanish bond auction slightly eased fears, selling to the top of the indicative range, however the appearance of solid demand was countered somewhat by limited supply and sharply higher yields across all three lines. Following the auction results, EUR/USD saw some modest support and the Bund exhibited slight weakness, but this was short-lived as the macroeconomic concerns took over once more. Unexpectedly, the 3-month Euribor rate fixing came in with its first increase since December last year, prompting some selling pressure on the Euribor strip. This move was retraced as it was rumoured that one bank had not submitted a rate due to the Ascension Day market holiday across certain European markets, prompting the incline.

 I am back from Buffett’s Omaha.  Every year I come back feeling supercharged for the year ahead.  This year was no different.  From morning till night I had the pleasure of sharing and debating ideas with investors from all over the world.  Though I did not plan it this way, the first day I had dinner with value investors/friends from the UK, on the second from Germany, and on the third from Spain.  I have at least a dozen stock ideas to research and new thoughts to process. 

Last week the hedgies were dumping, as the "momo whale" dumb money was chasing things higher on low volume intraday levitation. Today, idiot money (which is known thus for a reason) joins the dump fest. And according to Goldman, "the selling pressure is still muted." And unless the Politburo of the Developed World comes up with a Deus ex Printerium fast, muted may soon go to Max Volume.

Now that Europe is all the rage again, below we again summarize the key Euro-centric events through the end of the month, as well as all the sovereign bond auctions to look forward to (we use the term loosely). Finally, the squid summarizes the key events in the past week as well as the expected global catalysts in the next several days. Somehow we get the impression it will be all about the unexpected developments in the next 168 hours, especially with Spain, Italy, France and Germany coming front and center with a boatload of bond issuance as soon as 9 hours from now...

On the surface, the fact that NYSE short interest was just reported today to have risen to 13.1 billion shares as of April 30 could be troubling for the bears, as this just happens to be the highest short interest number of 2012. Indeed, an increase in short interest into a centrally-planned market is always disturbing, as it opens up stocks to the kinds of baseless short covering melt ups that simply have some HFT algo going on a stop hunt as their source, that we have seen in the past several weeks. Naturally, it would be far easier to be short a market in which Ben Bernanke managed to eradicate all other bears, especially when considering that a year ago the Short Interest as of April 30 was virtually identical.

One of the best definitions of fascism – the one used by Mussolini himself – is the “merger of state and corporate power“. We’re pretty much there …

There are only a few market prognosticators who can look to the stars for sage advice and not come away being giggled at. Art Cashin, UBS venerable trader-in-chief, notes that this weekend will see the biggest full moon of the year from the perspective of the Earth. This so-called 'Supermoon' will exert 42% more tidal force than normal and given the human body is 70% water, one can only imagine the bipolar impacts that this extra-terrestrial 'pressure' will create on the tiny minds of traders. What is more spooky is the fact that there is an unusual astrological configuration, not seen since 9/11, also occurring this weekend and rather worryingly The Times of Israel is noting the call-up of Emergency Israeli Troops in response to the worsening situation in the Sinai. So our minds will be wondering from an out-of-world experience and at the same time developments in the already unstable Middle East crank up one more notch on the Spinal-Tap-amplifier of sabre-rattling.

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Hard landing, soft landing, civil unrest, dominant economic superpower – the forecasts flow freely regarding China. The fact that good data is hard to come by regarding China does not seem to inhibit many outside observers. In this piece I will look at China through the lens of economic structure, Chinese history and culture—concepts which a number of observers often overlook. My general conclusion is that Chinese GDP growth rates are about to undergo a gradual but nevertheless perceptible decline. But I now believe a hard landing crash is unlikely, assuming that Europe does not totally disintegrate and the US does not roll over into a full scale recession.

Last week, when we discussed the recent ominous gas deal cancellation between Egypt and Israel we warned that the May Egyptian presidential election is the one that nobody is concerned about, yet should be far more prominent on everyone's radar, especially in the aftermath of not only the recent deterioration of Egypt-Israel relations, but also the withdrawal of the Arabian ambassador from Cairo. Art Cashin is one person who has been following this underreported hotbed of geopolitical tensions and has just issued his third warning of what he calls another "nose to nose" in the middle east. Issue is this particular nose has all the leverage courtesy of a little canal that has a huge impact on the most important asset price in the world.

9 Torture Myths DeBUNKED