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Just about an hour before the US non-farm payroll number is expected to print, and finally resolve the lingering question whether the Chairman will print in 3 weeks, things in Europe have gone from horrible to zombie.  A series of horrendous economic reports out of Europe including record Eurozone unemployment, a confirmation of the final European PMI plunge including the second largest monthly decline on record in UK manufacturing, and various soundbites from Syriza's Tsipras, have pushed the EUR to fresh two year lows, Spanish CDS to new all time wides German 2 Year bonds joining Switzerland in negative terriroty, and finally, Bloomberg, as noted earlier, to be "testing" a placeholder for a post-Euro Drachma.  As BBG summarizes: "European markets fall, led by consumer & tech stocks with the German market underperforming. The euro falls against the dollar and German 2-yr yields drop into negative territory. Chinese manufacturing PMI data below expectations, though above the 50 level; European manufacturing PMI in line with expectations, below 50. Euro-zone unemployment met expectations and seems likely Irish voters endorsed the EU fiscal treaty. Commodities fall, led by oil & natural gas. U.S. nonfarm payrolls, unemployment data due later." In summary - all data today fits with Raoul Pal's less than optimistic presentation from yesterday.

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Futures are well bid overnight even though following a modest short covering squeeze of the new record number of EUR shorts, the primary driver of risk, the EURUSD is now back to mere pips above its 2010 lows. It is somewhat confusing why equities are so jubilant about what can only be more imminent bailouts, following statements by the ECB's Nowotny who made it clear that the ECB is not discussing the renewal of bond purchases and that the central bank provides "liquidity not solvency." Adding to the confusion was a release in Chinese daily Xinhua which said that China has no intention of introducing large scale stimulus. All this simply means that the only possible source of liquidity remains the Fed, whose June FOMC decision could make or break the global stock markets, pardon economy, and why this Friday's NFP print is so critical. Absent a huge miss, it will be difficult to see the Chairman pushing through with another $750 bn-$1 trillion in LSAP. Which Europe desperately needs: first we got Italy pricing €8.5 billion in 6 month bills at much worse conditions than April 26, with the yield rising over 2%, or 2.104% to be precise, compared to 1.772% previously, and a BTC of 1.61, declining from 1.71. More importantly, the Spanish economic deterioration gets even worse after Spain just recorded a record (pardon the pun) plunge in retail sales. From AP: 'A record drop in retail sales added to Spain's woes Tuesday as the country struggles to contain the crisis crippling its banking industry and investors remained wary of the country's ability to manage its debt. Retail sales dropped 9.8 percent in April in year-on-year on a seasonally-adjusted basis as the country battles against its second recession in three years and a 24.4 percent jobless rate that is expected to rise. The fall in sales was the 22nd straight monthly decline, and was more than double the 3.8 percent fall posted in March, the National Statistics Institute said Tuesday." So all those focusing on the Greek economic freefall may want to shift their attention west.

Back in 2007, BP sold its Coryton refinery, one of the largest in the UK, to Swiss refiner PetroPlus for $1.4 billion. Fast forward 5 years later where we find that shortly after PetroPlus filed for bankruptcy, and was forced to proceed with a firesale of its assets, the European end demand market is so abysmal that a buyer could not be found for even a 30% off firesale. As Reuters reports, following a failure to sell Coryton for the low, low, price of $1 billion, the refinery, in dire need of CapEx investments, will be shutting down, and taking about 10% of UK refining capacity with it. "Insolvent Swiss refiner Petroplus' Coryton refinery in the UK is likely to close after its administrator PricewaterhouseCoopers (PwC) said on Monday that it had failed to find a buyer that could pay $1 billion for the site. Petroplus filed for insolvency in December after it could not meet its debt obligations. "The current economic environment, the challenge of raising $1 billion (£625 million) of funding for the refinery, including the $150 million capital expenditure 'turnaround' project ultimately proved prohibitive in the face of an over supplied European refinery market for both buyers and investors." The Coryton refinery has a capacity to process about 175,000 barrels of crude oil per day and additional 65,000 barrels per day of feedstock. Richard Howitt, the local member of the European Parliament said: "It's a bitter blow for the workforce...I think the process was flawed and that the government should have stepped in." It will be an even more bitter blow to the island nation's motorists who will suddenly find themselves facing with other spiking prices, a shortage of gasoline, or some combination of both.

European stock futures saw a jump higher at the cash equity open as the Eurostoxx broke through yesterday’s high of 2160. Comments from the Italian PM from late yesterday, who said that the majority of ministers are in favour of Euro bonds was noted but the move was largely technically driven with stops tripped on the ascent. In reaction to this the European bond yield spreads in the 10yr part of the curve tightened aggressively with OAT’s outperforming once again edging back toward the psychological 100bps level. Meanwhile in the FX market the USD weakened in early trade on the renewed risk appetite which bolstered the gains in EUR/USD alongside touted option defence by a Swiss name at the 1.2500 level. Commodity linked currencies such as the AUD was the main benefactor of a moderate move higher in crude futures and precious metals but has been capped so far by offers at 0.9800. Into the North American open prices have pared, with European equities in the cash and futures both slipping into the red, excepting the DAX. A distinctly light calendar from the US with only the May final Michigan report due, coupled with an early closure in the Treasury pit today, ahead of the Memorial day holiday, means that volumes will likely decline into the latter stages of the US session today.

With US markets already checked out ahead of the holiday day weekend, and Europe acting abnormally stupid (PIIGS bond spreads plunging, then soaring right back), there is little newsflow to report overnight, except for a key report that China loan growth is plunging in what is a major risk flag proudly ignored by all algos (but not the SHCOMP which dropped 0.7%). Futures have followed the now traditional inverse pattern of selling off early in the Asian session, then ramping following the European opening on nothing but vapors of hope. All that needs to happen today is a drop early in regular trading, following by a major squeeze on the third consecutive baseless rumor for the week to be complete, and for stocks to actually post an increase even as the EUR crashes and burns. Unless of course we get a rumor that Europe will be open on Monday even as the US is not there to bail out risk assets.

There’s been a lot of excitement in the past year over the rise of North American oil production and the promise of increased oil production across the whole of the Americas in the years to come. National security experts and other geo-political observers have waxed poetic at the thought of this emerging, hemispheric strength in energy supply. What’s less discussed, however, is the negligible effect this supply swing is having on lowering the price of oil, due to the fact that, combined with OPEC production, aggregate global production remains mostly flat.  But there’s another component to this new belief in the changing global landscape for oil: the dawning awareness that OPEC’s power has finally gone into decline. You can read the celebration of OPEC’s waning in power in practically every publication from Foreign Policy to various political blogs and op-eds.

All you need to read.

All you need to read.

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.

With a lack of European data, markets have remained focused on the macroeconomic issues throughout the morning. European equities have seen mixed trade this morning, starting off sharply lower following Moody’s downgrade of 16 Spanish banks late last night. Equities have been observed on a relatively upwards trend as market talk of asset reallocation into stocks from fixed-income has somewhat buoyed sentiment, however this remains unconfirmed. The news that Spanish banks are pressing regulators to reinstate a short-selling ban on domestic banking stocks has also helped keep negative sentiment towards Spanish financials at bay, with Bankia dramatically reversing recent trends and seen higher by around 25% at the midpoint of the session...The chief of the Australia and New Zealand Banking Group has said volatile conditions in global markets have caused the wholesale funding market for Australian banks to freeze, a further sign that the European turmoil is taking its toll on global markets.

And so the unthinkable has happened: the FaceBook IPO has priced (at $38 as noted yesterday) into the ugliest possible tape imaginable, combining continuing bad news for JPM, ongoing deterioration for European risk markets (nothing new here), the need for the EU Commission to deny it is working on emergency Greek exit plans (we all know what that means) a request by Spanish banks to reinstate the short selling rule (as we predicted back in February), and a #Ref!-ing circular demand by Spain that banks deposit €30 billion into a deposit-protection fund. In other words more of the same. And yet FB has to trade up... or else. Which is why at least for the time being futures are soaring, on that, as well as on the rumor that Europe may close again today at 11:30 am Eastern. However, if 13 out of 14 previous trading days are any indication, expect the the rumor to then resurface that Europe will be opening again on Monday which will wipe out all of the day's gains since who on earth will want to be long risk over a weekend  in which many things in Europe can go bump in the night.

Overnight: just more of the same, as markets collapsed, first in Asia, then in Europe, on ever more concerns what a Greek exit would do to Europe. The most important story of the night was a report in Dutch Dagblad claiming that ECB has turned off the tap for Greek bank liquidity: "At the end of January, Greek banks had received EUR73 billion in liquidity support from the ECB, but this amount has dropped by more than 50% now, according to the newspaper. The ECB is cutting back support because Greece has been holding off on recapitalizing its banking system, despite receiving EUR25 billion in funds for that purpose, the paper says." Whether this move is to force Greece to blink (even more) by making the previously reported bank run even more acute, or just general European stupidity, is unclear but it is certain to make the funding stresses across all of Europe far more acute. The news sent all peripheral bond yields soaring, and the EURUSD tumbling to under 1.27 briefly. 

All you need to read.