Crude

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.

All you need to read and some more.

One word: Spain, and more specifically, 6.00%+. That's where Spanish 10 Year bond yields are again, with Spanish CDS soaring to a fresh all time wide of 512 bps (+13.5 bps), and the Spanish-Bund spread blowing out to the widest since November. And to think it was only two days ago that the schizo market interpreted Spain's bank sector nationalization as good news. It may be for the bank sector (for a few days at least), but it sure isn't for the sovereign which would end up onboarding on the risk. Naturally, 48 hours later the market has figured out this fine nuance and is dumping everything Spain related once again. That this is surprising is an overstatement: we have seen all of this before, only last time it was Greece. Hopefully the same playbook works for Spain, and works better. The result - redness everywhere, especially in the aftermath of an implosion, and halt, in Italy's oldest and one of its biggest banks (guess which PIIG is next on the nationalization bandwagon), after Italian prosecutors on Wednesday ordered searches at the headquarters of Banca Monte dei Paschi di Siena and its top shareholder in a probe over alleged market manipulation linked to Monte Paschi's 2007 purchase of smaller peer Antonveneta. From Reuters: "Prosecutors in Siena, where Monte dei Paschi is based, said in a statement the offices of several Italian and foreign financial institutions based in Italy were also being searched by financial police as well as private homes, without elaborating. They said the searches were part of an investigation into possible market manipulation and obstructing the work of regulators with regard to raising the funds to buy Antonveneta." But probably the worst news comes from Bank of America which summarizes the Greek situation as follows: "If another election takes place, as seems very likely, Syriza could win. Their populist rhetoric is gaining momentum in Greece. Moreover, left voters from the Communist Party of Greece and Democratic Left are likely to vote for Syriza given its chance to win." Which naturally, is Europe's biggest nightmare. Sorry to say, but Europe appears very much unfixed and is about to break even more.

While Turkey has assured the U.S. government it will cut purchases of oil from Iran by 20% this year, its total trade with the Islamic Republic increased 47% to $4.8 billion in the first quarter from a year earlier. Sanctions aimed at isolating Iran because of its nuclear program, combined with revolutions in the Middle East, have spurred a tripling in the region’s purchases of Turkish precious metals and jewels to $942 million in the first three months, from $282 million in the same period last year. This 30% increase in demand is contributing to gold remaining above $1,600/oz in what has all the hallmarks of another period of consolidation prior to higher prices. “Turkey is exporting massive quantities of gold to Iran and Arab Spring countries as citizens in those countries switch to portable wealth,” Mert Yildiz, chief economist for Turkey at Renaissance Capital, told Bloomberg on April 30. The increase in trade with Iran comes as sanctions make it harder for trading partners such as Turkey, India and China to pay in dollars and euros. Iran said in February it would accept payment in any local currency or gold. Reuters report today that Iran is accepting payments in yuan for some of the crude oil it supplies to China, the Iranian ambassador to the United Arab Emirates said on Tuesday. "Yes, that is correct," Mohammed Reza Fayyaz told Reuters when asked to comment on an earlier report in The Financial Times.

European equity markets are seen trading in negative territory across the board at the midway point as the lack of a Greek governing coalition continues to weigh on sentiment. As such, an earlier Greek T-Bill auction passed by with an unsurprising increase in borrowing costs for the country. The concern over sovereign debt is clear elsewhere, as the spread between peripheral 10-year government bond yields remain wider against the German Bund. Very strong German Industrial Production data has failed to provide relief for the DAX index as concerns on the periphery outweigh the strength in the core. The monthly reading for March beat expectations, coming in at 2.8% against estimates of 0.8%. Overnight reports from the Spanish press concerning a government intervention in the lender Bankia have been denied by the Spanish Ministry, commenting that the aim for the company is a cleanup and restructuring, not a seizure. EU’s Almunia has commented on the developments, saying that it seems likely the bank will receive state aid.

Confirming that the market is now completely insane is a rehash of the actual catalyst data flow: recall that yesterday the one thing that pushed stocks higher, as described in Clutching at Straws, was the surge in German factory orders. Today, we get another huge beat of expectations in German Industrial Production and everything is red. Although now that US traders, most of them originating at Liberty 33, are starting to walk in, we may get yet another of the much anticipated and largely loved turns from a blood red premarket to green everywhere.

• It just get worse and worse: After McClendon's trades, Chesapeake board gave blessing (Reuters)
• Iran Accepts Renminbi for Crude Oil (FT)... which is not news: recall China and Iran Bypass Dollar from July 2011
• As Gas Prices Fall, a Sigh of Relief  (WSJ)... so now people can direct their disability payments to where they belong: extra fries
• Greece Braces for a Repeat of Elections (FT), as first predicted by Zero Hedge, this will be a recurring affair
• China dissident Chen says officials must face justice (Reuters)
• Merkel Urges Athens to Stick With Reform (FT)
• Hollande’s Win is a Chance for Change (FT)
• U.K. Manufacturers Expect Exports to Rise (WSJ)
• U.S. Says Bomb Plot Disrupted Before Public Threatened (Bloomberg)
• Santorum Endorses Romney as Republican Nominee (Bloomberg)
• Beijing May Host OTC Market (China Daily)
• India Delays Tax Avoidance Laws (FT)

After plunging by 19 points in the overnight session, and just touching the 100 DMA, ES has managed to score a recovery, one which has so far clutched at straws, namely stronger than expected German factory orders (+2.2% vs Exp. 0.5%) despite German GDP due in a week which may well push the core European country into the same double dip tsunami which has swept the resto of Europe, if it prints even a slightly negative GDP print. News from Spain that the "bad bank" bailout has started, with Bankia as the first casualty is also lifting spirits as it means that more taxpayer cash will be used to support risk assets. How long this micro euphoria of "bad news is good news" lasts is anyone's guess, but mostly that of the BIS which after failing to defend the 1.3000 EURUSD, has again managed to get the all important pair over the critical support area. 

European cash equities opened sharply lower this morning following electoral uncertainties arising from various corners of Europe, notably Greece and France. Volumes also remain light as the market closure across the UK reduces the number of participants today. The mainstream political parties from Greece, PASOK and the New Democracy, failed to establish a majority this weekend as voters firmly expressed their discontent with the political establishment, evident in the rise of fringe parties. As such, the leaders of New Democracy and PASOK will now attempt to establish a coalition party with the splinter group Independent Greeks (a party notable for its anti-EU/IMF stance), due to begin as soon as today. The uncertainty in Greece’s future has taken its toll across the markets today, with EUR/USD beginning the session sub-1.3000 and all European equities trading markedly lower throughout most of the morning session. Elsewhere on the political front, Francois Hollande has won the French Presidency and is to be inaugurated on May 15th, as such; participants now look out for any comments regarding the relationship between the new French leader and German Chancellor Merkel. The Spanish government are set to make an announcement on Friday concerning the continuing troubles over the Spanish banking sector, with a government source commenting that the plans will include the creation of a 10- and 15-year ‘bad bank’. Recent trade has seen a recovery across forex and stocks as EUR/USD grinds higher and stock futures move closer to unchanged. Strong German factory orders data has helped the moves off the lowest levels, as demand from outside the Eurozone helps lift the figure above expectations of +0.5% to +2.2% for March.

WTI crude just broke $100 (traded $99.99) - an almost 3 month low having dropped its most in the last 3 days since mid-December 2011. Remember: it has long been known that Obama, pardon Bernanke, will not allow THE NEW QE until a barrel of the black gold cost double digits. He just got his wish.

All you need to read.

Here is what happened in Europe overnight, and why the market sentiment is already negative in advance of an NFP number which many are watching closely as a miss of expectations will cement the thesis that the US economy has now rolled over and will likely need more nominally dilutive aid from central planners to regain its upward slope:

• Spain Services PMI for April 42.1 – lower than expected. Consensus 45.4. Previous 46.3.
• Italian Services PMI for April 42.3 – lower than expected. Consensus 43.7. Previous 44.3.
• France Services PMI for April 45.2 – lower than expected. Consensus 46.4. Previous 46.4.
• Germany Service PMI for April 52.2 – lower than expected. Consensus 52.6. Previous 52.6.
• Euro-area Service PMI for April 46.9 – lower than expected. Consensus 47.9. Previous 47.9.

And while the data was bad enough to send European stocks and US stock futures lower, the latest meme spreading as the first US traders walk in, is one of reNEWed QE expectations already, if a very weak one for now.

WTI Crude dropped its most in almost five months today, losing around 2.5%, beginning its descent after Draghi somewhat disappointed a hungry markets this morning (after better-than-expected claims data). Silver (which recoupled with Gold today) and Copper also started their drops at that point and extended the losses after the ISM Services miss. Gold leaked lower (though not as much as the rest of the commodity complex) even as the USD (which had been following its typical path of strengthening through the EU day session) dropped as an expectant EUR popped on no rate cuts. Stocks started their slide at the same time but broad risk-assets were in general leading equities lower (more carry FX and commodities than Treasuries today). We had a little bounce in stocks into the European close (up to VWAP) but that quickly fell back, lost today's lows, then broke yesterday's lows heading for one-week lows and the S&P 500's 50DMA. AAPL lost its 50DMA and closed there for the first time since earnings. After some noise around the macro data (and Draghi) this morning, Treasuries were extremely flat - trading in a very narrow range all afternoon - as did FX in general but AUD kept leaking lower (down 2% on the week now) and JPY stable on the week. Equities and credit re-converged today and late in the afternoon as ES (the S&P 500 e-mini futures) caught up to the downside of broad risk assets and stabilized in the late day ahead of tomorrow's noisy and meaningless NFP print. ES volume was average as it traded closest to its 50DMA in a week (and dropped the most in 8 days today closing near its lows of the day) and VIX, while off its highs of the day, closed above 17.5% - its highest close in over a week. While stocks are short-term in line with risk-assets, over the medium-term they remain notably expensive (especially to Treasuries since last week).

All you need to read.

European equities are trading higher at the midway point, with modest risk appetite observed ahead of the ECB rate decision and subsequent press conference. A large volume of corporate earnings has helped European stocks from the open, with the large cap names such as SocGen and BMW posting a strong set of results. A smooth set of auctions from both Spain and France have helped tighten the European government 10-yr bond yield spreads against Germany. The French results saw a reduction in borrowing costs and solid demand across all lines, with the Spanish auction selling to the top of the indicative range, albeit with an increase in yields. Elsewhere, Services PMI data from the UK has disappointed to the downside, however the figure still indicates growth in the services sector with the figure coming in at 53.3. A breakdown in the data has shown that clients do remain cautious, but optimism is on an upward trend. Looking ahead in the session, market focus will be on Barcelona as ECB’s Draghi prepares for his press conference at 1330BST/0730CDT.