Crude

European bourses are trading in modest positive territory ahead of the US open with early trade seeing moves higher across equities as Germany printed an expectation-beating 0.5% growth in their flash Q1 GDP. Elsewhere, Eurozone growth surprised to the upside somewhat, coming in flat against the expected contraction of 0.2%. However, as time passed, Greece garnered the focus of markets once more as they face a EUR 435mln foreign-law bond redemption today. Government source comments have somewhat reassured markets that the payment will be made, but participants await official confirmation. Further assisting the moves off the highs was a lower-than expected ZEW survey from Germany, with economists noting that the French and German elections have knocked confidence in the country over the past month.

As already noted, one piece of good news out of Europe - German GDP (ignore the huge ZEW miss) - was enough to make everyone forget the Italian bank downgrade, and that Greece is one election away from unwinding the EMU. Yet perhaps it is good to have a modest bounce from a market, which however not even Goldman says is oversold: after all the central planners need a day or two to regroup, and consider what currency to crush next to buy the global nominal stock market a few months of breathing room.

The failure to form a coalition government in Greece this weekend has prompted risk averse trade across the asset classes this morning with publications across Europe continuing to speculate about the potential exit of Greece from the Euro-area. As a result of this the Spanish 10yr yield touched 6.2% and the respective spreads over benchmark bunds in Spain and Italy have traded as wide as 30bps so far today. The knock on effect has been a sell-off in the financials which has seen the IBEX and FTSE MIB under perform in the equity markets with a relative safe-haven bid into the USD weighing on crude futures and precious metals. Spanish t-bill auctions and a variety of lines tapped out of Italy did stem the tide after selling around the top end of their indicative ranges but focus will remain solely on Greece given a lack of tier 1 data out of the US. Moving forward the next meeting of party heads in Greece is scheduled to commence at 1730BST, however, the head of the Syriza party has already indicated he will not be attending with the leader of the democratic left suggesting he is doubtful that a coalition can be formed.

The only good news spin this morning was that the Greek, pardon Spanish contagion, has not reached Italy, after the boot-shaped country sold €5.25 in bonds this morning at rates that did not indicate a meltdown just yet. It sold its three-year benchmark at an average 3.91 percent yield, the highest since January but below market levels of around 4 percent at the time of the auction. It also sold three lines due in 2020, 2022 and 2025 which it has stopped issuing on a regular basis. And this was the good news. The bad news was the not only has the Spanish contagion reached, well, Spain, but that everything else is now coming unglued, as confirmed first and foremost by the US 10 Year which just hit a new 2012 low of 1.777%. Spain also is getting hammered with CDS hitting a record wide of 526 bps overnight, and its 10 Year hitting 6.26% after the country sold 364 and 518-Day Bills at rates much higher rates than on April 17 (2.985% vs 2.623%, and 3.302% vs 3.11%). But the highlight of the day was the Banco de Espana release of the Spanish bank borrowings from the ECB, which to nobody's surprise soared by €36 billion in one month to €263.5 billion, more than doubling in 2012 from the €119 billion at December 31.

All you need to read and some more.

Despite the optimistic $300 million a year savings projection, there are pros and cons of this deal for Delta

All you need to read and some more.

• PPI: -0.2%, a decline, and a miss of expectations of 0.0%, Y/Y +1.9%, Exp. 2.1%, first drop in 4 months.
• Core PPI: 0.2%, in line.
• April PPI “should allay fears of producer costs being passed through to customers downstream,” says Bloomberg economist Joseph Brusuelas
• Supports Fed’s assessment of transitory inflation increase on rising oil, commodity costs at end 2011
• Intermediate costs decline points to reduced pressure on profit margins: Brusuelas
• Core intermediate PPI, “closely” watched by Fed, increase "benign," notes Bloomberg economist Rich Yamarone

Yes, believe it or not, there is a world outside of JPM in the past 12 hours, and it was very ugly: weak Chinese CPI, big miss in Chinese industrial output (+9.3%, Est. +12.2%), even bigger miss, actually make it a decline, in Indian factory Outupt (down -3.5%, est. +1.7%), a collapse in China’s new local-currency loans plunging by 32% m/m in April, making a new money infusion paramount (yet inflation still abounds, and the threat of NEW QE keeping the PBOC mum - oh what to do?) and of course... Greece, where things are heading for a second election at breakneck speed, and where Syriza is gaining about a percent in new support each day, guaranteeing life for Europe will be a living hell in one month. What else happened overnight to send futures down 0.5% (and JPM down 8%). Below is a full recap from Bank of America.

For the third year in a row, crude oil prices have stumbled in April (-26% in 2010, -17% in 2011, and -10% in 2012 so far). Much has been made of the help this will offer the economy and consumer spending but this is ceteris-paribus linear thinking. There are a few other critical aspects to consider that make many, including Barclays, believe "there is little to the latest price action than the increasingly self-fulfilling prophecy of ‘sell it in May and go away’, exaggerated by market positioning, with broader macroeconomic concerns used as a lightening rod." With crude inventories on the high side and gasoline (and other oil product) inventories relatively low and falling - we would hold our breaths on the recent crude price drop funneling along to the retail pump price anytime soon as there is one critical aspect of the supply-demand equation that many have missed - a period of heavier-than-usual refinery maintenance which while temporary have reduced demand but tell us nothing about the state of final demand. In other words, even if a balance of sorts was achieved in terms of crude flows in March and April due to maintenance, that balance is likely to be disturbed from June onwards. The mainstream media is full of talking-heads on the chronic weakness in US oil demand, but it does not appear to be a real phenomenon according to the steadily improving flow of data and while Greece, Hollande, and US macro data has dragged out macro shorts, it would appear the fundamentals support oil prices higher from here. With the upward-sloping curve in crude to year-end and the relatively small drop this week (-1.2% only in WTI) despite all the derisking, perhaps the market is already starting to realize.

All yopu need to read.

European equities continue the downward trend throughout the morning, despite opening slightly higher. Similarly to yesterday the moves are not data-driven, however the ECB have revised their forecasts for Euroarea growth downwards to -0.2% this year from -0.1% and have revised their inflation outlook upwards to 2.3% from 1.9%. The focus remains on Greece as the PASOK leader Venizelos grabs the baton and now attempts to form a stable coalition. Commentary from Greece so far has not been revelatory; Venizelos has reiterated that he wishes to remain within the Eurozone and affirmed that his party has not changed its policy with respect to the bailout. Flight to quality is observed throughout the markets, with the German Bund already testing yesterday’s highs several times and the major cash equities seen lower throughout the continent.

There was no good news overnight: CSCO (a rather prominent DJIA member) imploded on global demand weakness, China posted a larger than expected trade surplus which however was due to a greater than expected drop in imports, European industrial production was slightly better in Italy but offset by worse than expected news out of France (as for Greece - forget it), while all the attention continues to be focus on how the Greek endgame plays out, and now Spain too. Still, futures are on the cusp of greenness simply because following 6 days of declines stocks are oversold, and will desperately try to rally into any good news: such as initial claims later today, which will once again be spun as "declining" following a bigger upward revision to last week's number, making this week's appear to drop... at least until next week. As usual be on the watch for any erroneous headlines based on spurious rumors out of Greek developments: these tend to more the EURUSD, and thus ES, quite violently.

And Keystone will only drive prices HIGHER

Ask yourself the following. For the technologies which allowed for the increased rate of extraction of coal in the 19th century, or,  which now allow for the increased rate of extraction of natural gas from shale in the 21st century: did those technologies create the resources or merely extract them as they already existed? The answer seems rather obvious, doesn’t it? I mean, I want to be sympathetic to the view that technology creates resources, in the sense that technology makes previous unrecognized or unrecoverable resources available. But a threshold I cannot cross, however, is that idea that there are always a new resources waiting to be discovered, if we can only create a technology to obtain them.

Which brings us back to mining for minerals. On asteroids.