Reuters

• China’s Biggest Banks Are Squeezed for Capital (NYT)
• Greeks detect hypocrisy as Dutch coalition stumbles (Reuters)
• Hollande Blames Europe’s Austerity Plan for Le Pen’s Rise (Bloomberg)
• In a Change, Mexico Reins In Its Oil Monopoly (NYT)
• China Tire Demand Slows as Economy Decelerates, Bridgestone Says (Bloomberg)
• Social Security’s financial forecast gets darker; Medicare’s outlook unchanged (WaPo)
• Fed’s 17 Rate Forecasts May Confuse More Than Clarify (Bloomberg)
• Senate to vote on array of Postal Service overhaul proposals (WaPo)
• Weidmann Says Bundesbank Is Preserving Euro Stability (Bloomberg)

Following yesterday's disastrous European economic data which basically missed everything, it was time for a Spanish Bill auction to fix everything, same as always (if only this time there was no surge in some German confidence index). Below is a recap of all of today's ECB cash recycling operations, aka auctions, which have given the overnight futures an uplifted. Still, we wonder why: the yields on all were higher across the board, which in turn means that sovereign funding is getting increasingly unsustainable.

All you need to read and some more.

The IMF meeting ended yesterday and leading world economies agreed to more than double the lending power of the IMF in an effort to protect the global economy from the euro zone contagion. This was still short of Lagarde’s $600 billion goal. The Netherlands  was drawn into the spotlight over the weekend when the government failed to agree on budget cuts, making elections nearly unavoidable and casting doubt on its support from future euro zone aid.  Investors will watch the China HSBC manufacturing survey at 1430 GMT as a measure of the conditions of the world’s 2nd largest economy.  The Federal Reserve meets on Tuesday and Wednesday, and its statement on monetary policy is given on April 25th.  The Bank of Japan meets on Friday and is expected to ease again. Trading is sluggish as the market waits for clues.

• A Forecast of What the Fed Will Do: Stand Pat (Hilsenrath) - they finally realized that they have to leak the opposite...
• Draghi's ECB Rejects Geithner-IMF Push for More Crisis-Fighting (Bloomberg)
• Wal-Mart's Mexico probe could lead to departures at the top (Reuters)
• The Sadly Unpalatable Solution for the Eurozone (FT)
• US Regulators Look to Ease Swaps Rules (FT)
• Yuan, Interest Rate Reform to be Gradual: China Central Bank Chief (Reuters)
• Run, Don't Walk (Hussman)
• Hollande Steals Poll March on Sarkozy (FT)

Two months ago, we warned that while the world had decided to blissfully move on from last year's topic #1, the MENA revolutions, and specifically the massive power vacuum left in their wake, things in the region were far from fixed. Quite the contrary, and as we added back then "it is very likely that the Mediterranean region, flanked on one side by the broke European countries of Greece, Italy, Spain (and implicitly Portugal), and on the other by the unstable powder keg of post-revolutionary Libya and Egypt, will likely become quite active yet again. Only this time, in addition to social and economic upheavals, a religious flavor may also be added to the mix". Yet nobody cared as after a year of daily videos showing Molotov Cocktails dropping like flies, people had simply gotten habituated and needed some other source of excitement. Nobody cared also when a week ago Art Cashin warned that the hidden geopolitcal risk is not Spain but Egypt. Today, Egypt just reminded at least one country why perhaps caution about the instability caused by having a military in charge of the most populous Arabic country and the one boasting "the Canal", should have been heeded after Egypt just announced that it is cutting off its natural gas supplies to Israel, which just so happens relies on Egypt for 40% of its energy needs.

8 pm has just passed in France, and all the polls are now closed, which means official preliminary data is now allowed - the first results from IPSOS are in, and are as follows:

• Francois Hollande: 28.4% - with victory virtually assured in the runoff round on May 6, it is now Hollande's election to lose. Could he? Yes - read here how Sarkozy can still catch up per DB.
• Nicholas Sarkozy: 25.5% - make the runoff round
• Marine Le Pen: 20.0% - extreme right: much better than expected as nationalism is back with a bang.
• Jean-Luc Melenchon: 11.7% - extreme left: best communist showing since 1981 yet weaker than expected.
• Francois Bayrou: 8.5%
• Eva Joly: 2.0%

Today I'd like to talk a bit about the virtual radio silence in the Netherlands on its growing Target2 balances. While a healthy but acrimonious debate has raged on this topic in Germany, there is almost nothing to be heard about it in the Dutch media. I did three google news searches using:

Target2

Target2 + Dutch

and

Target2 + Nederland

In an admittedly quick look, I came up with a grand total of one article of three sentences:

Update: according to Belgian Le Soir, first exit polls show that Hollande is not surprisingly ahead, with 27% of the vote, 25.5% for Sarkozy, 16% for Marine Le Pen, and 13% for Jean-Luc Melenchon. More or less just as expected, and setting the stage for the runoff round which will be Hollande's to lose. French speakers demanding a minute by minute liveblog, can find a great one over at Le Figaro, and an English-one can be found at France24.com

As of 8 am CET, polls are open in the first round of the French presidential elections where voters are expected to trim the playing field of ten to just two candidates, incumbent Nicholas Sarkozy and his socialist challenger Francois Hollande, who will then face off in a May 6 runoff, where as of now Hollande is expected to have a comfortable lead and take over the presidency as the disgruntled French take their revenge for an economy that is contracting, an unemployment rate that keeps rising (see enclosed) despite promises to the contrary, and as their to "express a distaste for a president who has come to be seen as flashy following his highly publicized marriage to supermodel Carla Bruni early in his term, occasional rude outbursts in public and his chumminess with rich executives.....France is struggling with feeble economic growth, a gaping trade deficit, 10 percent unemployment and strained public finances that prompted ratings agency Standard & Poor's to cut the country's triple-A credit rating in January." In a major shift for the country, Hollande would become France's first left-wing president since Francois Mitterand, who beat incumbent Valery Giscard-d'Estaing in 1981. As Reuters reports, "Hollande, 57, promises less drastic spending cuts than Sarkozy and wants higher taxes on the wealthy to fund state-aided job creation, in particular a 75 percent upper tax rate on income above 1 million euros ($1.32 million)." The Buffett Rule may have failed in the US but La Loi de Buffett is alive and well in soon to be uber-socialist France. Yet it is not so much Hollande's domestic policies, as his international ones, especially vis-a-vis the European Fiscal Treaty, Germany, and most importantly the ECB, that roiled markets last week, causing French CDS to spike to the widest since January. In other news, goodbye Merkozy, hello Horkel as the power center shifts yet again to a new source of uncertainty and potential contagion.

All morning we have been blasted with 2011 deja vu stories how the IMF panhandling effort has finally succeeded, and how Lagarde's Louis Vuitton bag is now full to the brim with $400 billion in fresh crisp US Dollars bills courtesy of BRIC nations, and other countries such as South Korea, Australia, Singapore, Japan (adding $60 billion to its total debt of Y1 quadrillion - at that point who counts) and, uhh, Poland. From Reuters: "The Group of 20 nations on Friday were poised to commit at least $400 billion to bulk up the International Monetary Fund's war chest to fight any widening of Europe's debt crisis." We say deja vu because it is a carbon copy of headlines from EcoFin meetings from the fall of 2011 in which we were "assured", "guaranteed" and presented other lies that the EFSF would surpass $1 trillion, even $1.5 trillion on occasion, any minute now. Alas, that never happened, and while we are eagerly waiting to find out just what the contribution of Argentina will be to bail out Spanish banks (just so it can expropriate even more assets from the country that rhymes with Pain), we have one simple question: does the I in the IMF stand for Idiots? Why? Because this is merely yet another example of forced capital misallocation, only this time at a global scale.

Gold rose $1.50 or 0.09% in New York and closed at $1,640.80/oz yesterday. Gold traded sideways in a narrow spread in Asia and continued this in European trading climbing up around 0.16%. 

Gold rose quickly from $1,631/oz to nearly $1,650/oz in minutes on volume with some chunky 3000 lot plus batches of orders going through on the COMEX pushing gold up. A determined seller again appeared and gains were capped at that level.

• Current account surplus recycling goes global: BRICS demand bigger IMF role before giving it cash (Reuters)
• Obama oil margin plan could increase price swings (Reuters)
• Britons Abandoning Pensions Amid ‘Outdated’ Rules (Bloomberg)
• Hedge-Fund Assets Rise to Record Level (WSJ)
• Way to restore confidence: SEC considers case against Egan-Jones (FT)
• Qatari wealth fund adds 5% Tiffany stake  (FT)
• "Do we file?" Dewey Pitches Plan for Rescue (WSJ)
• French president slips further behind Socialist challenger Hollande (ANI)
• Nine U.S. Banks Said to be Examined on Overdraft Fees (Bloomberg)
• Capital Rotation: Investors fret on emerging markets and look to U.S. (Reuters)
• Verizon's Answer to iPhone: Windows (WSJ)

All you need to know.

In what may be the gray swan indication that all hell is about to break loose, we read that one of the world's largest hedge funds, British Man Group with $58 billion in AUM, is about to launch High Frequency Trading - the same high volume churning, sub-pennying, liquidity extracting, stub quoting and quote stuffing parasite that crashes the equity, and as of recently the FX and commodity markets, into that most sacred of markets: US Treasurys. The official spin: "The Man Systematic Fixed Income fund, yet to be launched, will try to identify and profit from dislocations in liquid government bond markets." What this really means is that the final frontier of market rationality is about to be invaded by artificial momentum generating algorithms, who couldn't care less about fundamentals, and whose propensity to crash and burn at the worst of times, may end up costing the Fed all those tens of trillions it has spent to keep the Treasury market calm, cool, collected, and largely devoid of any volatility and MOVEment. But all that is about to change: "The unit is run by Sandy Rattray, who co-developed the VIX. VIX volatility index, also known as the "fear index", widely used to measure investors' perception of risk." As a reminder, the VIX index is only relevant when there are surges in volatility, something which we are confident Mr. Rattray will no doubt bring to Treasury trading momentarily. 

At least Argentina kinda, sorta had the right idea: find an expensive foreign asset and nationalize it, impotent EU sound and fury be damned. Key word here: foreign. A few days later, the latest trade was escalation move appears to have gone viral, if with some curious, and serious, modification in the process. Minutes ago we learned that the Italian Finance police had seized a 20% stake in a heretofore unnamed firm (how does the police seize a stake? They pocket 20% of the electronic shares held in custody by the local DTCC? or they kidnap 20% of the Board of Directors? Inquiring minds want to know). We vaguely expected it would be a retaliatory move, and the firm would be based out of Latin America. No such luck. As Reuters fills in, the company "seized" is Premafin, "which controls Italy's No. 2 insurer Fondiaria-SAI as part of a judicial probe on market manipulation, the tax police and a judicial source said on Thursday."