Crude Oil

While API and DOE data has not exactly been consistent recently, the fact that API reported a huge 6.7 million barrel inventory draw for the last week is significant. Of course, all eyes will be focused on production data tomorrow but for now, WTI prices are up at the highs of the day.

After a quiet Asian session, where not even the latest Chinese CPI miss was enough to push the SHCOMP to new multi-year highs, all eyes were on Europe where a few hours ago the European Commission announced it had received not one but two new proposals from Greece with the Greek government adding that it considers proposals submitted last week as remain basis for political negotiations. However, barely had Europe received the Greek addenda when it nein'ed all over them, with BBG citing an international official directly involved in talks saying that the "Greek government's revised proposal to unlock bailout funds is vague rehash of earlier plans, not considered credible."

China's trade balance surged once again, spiking to near the highest on record according to data released this weekend, driven by a collapse in imports (and a roughly in line export print). Exports dropped 2.5% YoY, dropping for the 4th month of last 5 but it was Imports that createred. Down a stunning 18.1% YoY (the 5th drop in a row) China imports collapse reflects both volume and price effects and crucially, as Goldman notes, volume effects may be even more critical. Hidden deep inside the data, China exposed the oil market's greatest fear - it appears to be done restocking its SPR.

Following OPEC’s decision not to cut production at its June 5, 2015 meeting in Vienna, oil prices should likely continue their descent that began in early May (Figure 1). Prices may fall into the $50+ per barrel range since there is no tangible reason for their rise from January’s $46 low.

While there were key macroeconomic data out of Asia earlier in the session, with Japan revising its Q1 GDP up from 2.4% to 3.9% (due to an upward revision to capex) making some wonder if it simply didn't snow in Japan this winter, as well as Chinese trade data that was once again disappointing with the third consecutive drop in exports coupled with an 18.1% collapse in imports hinting that nothing is going well in China's economy (which once again sent stocks soaring this time up another 2.2% on certainty another PBOC rate cut is imminent, pushing the PBOC to a fresh 7-year high of 5,132), it was actually a leaked Obama comment on the strong USD that moved markets.

Grit your teeth if you have to.  Cry if you want to.  US labor market is improving and the dollar is strengthening.

After yesterday's unprecedented volatility fireworks across all markets and continents, today so far has been a modest disappointment, with no crashes and subsequent surges in China, where the Politburo's only achievement was keeping the bubble dream alive by pushing the Shanghai Composite over 5,000 for the first time since January 2008, closing the index 1.5% higher on the day - a very modest gain by China's recent blow-off top standards.  Europe, too, has been relatively tame with the 10 Year Bund starting off on the wrong foot, the yield rising back above 0.91% before once again dipping to the upper 0.8% range, tracking the move in the EURUSD tick for tick, which also is a tractor beam for the US 10 Year. On the equity, front, things are just as muted, with futures at the Low of Day as of this moment, despite yesterday's last minute manic buying spree, the S&P set to open below 2100 as a result.

Legislation has been in introduced in the California state Senate that would increase the state’s approximately 47 cents-per-gallon gas tax by 10 cents.  The new California fuel levy, which would be the state's first increase since 1994, will be collected on top of an 18.4-cents-per-gallon federal gas tax that is charged to all drivers in the nation to fill the federal government’s transportation funding coffers. 

For once Mario Draghi was right. A day after the European central bank head warned of a spike in volatility, volatility did just that, with markets everywhere from China to Europe seeing volatility explode.

With bond yields spiking and the dollar dumping, one might think precious metals would be bid... but that anti-status quo reality will not do and so, gold and silver (and crude oil) are tumbling faster than Sepp Blatter's reputation...

With the Greek IMF payment just 48 hours away, and Europe having submitted its best and final offer to Greece in a battle of "deal proposals", today Greek PM Tsipras will meet with European Commission President Juncker to discuss the recently submitted reform proposals by the Greek premier. However, a Greek government spokesman says that Greek PM Tsipras will not meet Eurogroup's Dijsselbloem despite several reports suggesting that they would do so later today. Last night it was reported that the EU, ECB, IMF agreed on terms for a cash-for-reform plan to be presented to Greece. However, a senior EU official has said that they are concerned that the stringent measures of the proposal could be met with rejection by Greece.

During “normal times” – an economic growth phase accompanied or generated by rising systemic leverage – central banks have incentive to promote nominal growth and inflation, which make banking systems profitable and their free-spending political overseers happy. In such times, commercial banks have fiduciary responsibilities to shareholders to constantly increase their market values, which they do by expanding their balance sheets.  Now that economies are highly leveraged, extinguishing debt would require banks to reduce the sizes of their loan books, which would shrink their market values. Thus, it seems economic policy makers never have incentive to promote debt extinguishment in the banking system, regardless of economic conditions or prospects.

Once again it's all about Greece, with the latest iteration of a "Greek deal is imminent" rumor making the rounds and, just like yesterday, sending futures in the green, just a little over an hour after the increasingly more illiquid E-mini future has slid 0.7%. The EUR, where the bulk of Virtu headline kneejerk reacting algos are to be found, has surged over 100 pips overnight on more hope and optimism.

• Senate lets NSA spy program lapse, at least for now (Reuters)
• Draghi Deflation Relief Means Little With Greek Threat Unsolved (BBG)
• Tepid factory data add to Asian gloom (FT)
• Citigroup Likely to Close Banamex USA (WSJ)
• Frugality of High Earners in U.S. Shows Long Shadow of Recession (BBG)
• Greece’s Tsipras Warns Bell May Toll for Europe (BBG)
• Carnegie Mellon Reels After Uber Lures Away Researchers (WSJ)
• Romário leads drive for Brazilian probe into Fifa (FT)
• Faster than China? India's road, rail drive could lay doubts to rest (Reuters)