The real point to consider in the currency markets right now is and on some level just restating the obvious but the currency wars are killing Europe. The game tactic of the US is having serious long term implication for the survival of the monetary union in Europe.  Notwithstanding the fact peripheral European countries have been living beyond their means or at the least their governments.

The question though is what’s the problem with the US printing money?  Well simply the US has for the most part saved itself (for now) but in doing so it has destabilized Europe to a point its single currency is killing its periphery. As many commentators and academics are feverously assessing what a Greek exit would mean bottom line nobody knows exactly the outcome as we are dealing with human psychology and that is unquantifiable in financial markets behavior.

Furthermore,  as long as the US keeps on its economic path of low dollar policy and cheap money the global economy can and will more likely than not continue to be destabilized to a point of no return.

Beggar Thy Neighbor

Market focus is which is better “the devil you know” or “the devil you don’t know”, EUROs or DOLLARs or neither.  View is EUR weakness to win as the risk is far too great than just the talk from the FOMC. Good trading. CF

The leading European indexes closed mixed, as the CAC40 edged up .3%, while the FTSE dropped .6%, and the DAX slipped .3%. Shipping giant, Maerk issued a cautious outlook on freight rates due to economic slowness, sending its shares down 6.5%.

German Chancellor Angela Merkel said Germany wants Greece to stay in the euro, but rumors the ECB may stop dealing with certain Greek banks undermined her remarks.

US stocks ended lower in a volatile session. The Dow slipped 33 points to 12599, the Nasdaq dropped .7% to 2874, and the S&P 500 fell .4% to 1325.

Dow Surrenders Early Gains to Close Lower

JC Penny shares plunged 19.7% after reporting a loss which was larger than forecast, and Abercrombie & Fitch tumbled 13% on weak sales data.

Treasuries and Commodities
Bonds rose moderately, with 10-year notes up 3/32 to yield 1.76%, and 30-year notes climbed 14/32 to yield 2.9%.

Natural gas surged 5% to 2.625, while the rest of energy fell. Crude oil skidded 1.3% to 92.79, and gasoline sank 1.1 to 2.9108.

Silver dropped 3.4% to 27.12, gold slumped 1.3% to 1536,60, and copper dropped 1.1% to 3.478.

Agricultural futures soared, as wheat advanced 5%, and corn surged 3.8%.

Currencies
Wednesday was another winning day for the US Dollar. The Pound and Canadian Dollar both dropped .6%, while the Euro and Swiss Franc edged down .2%. The Australian Dollar slid .4% to .9905, and the Yen eased .1% to 80.30.

Economic Outlook
Housing data was mixed, as housing starts rose to .72M from .7M, beating estimates, while building permits fell to .72< from .77M, below estimates. Industrial production increased by 1.1%, beating estimates. The Fed’s minutes showed several policymakers favored additional easing efforts if the economic recovery stagnates.

Thursday’s reports will include weekly unemployment claims, the Philly Fed survey, leading indicators, and e-commerce retail sales.

Earnings are due from Aeropostale, Children’ Place, Dollar Tree, Gap, Marvell Technology, and Wal-Mart.

Facebook’s IPO will be priced on Thursday, and begin trading on Friday.

-Bradley Welcher

So what does this mean to me? At the moment there is a little bit of waiting and seeing. Like it or loathe it, most of the binary options platforms are based in Cyprus. The gentle tax laws and less strict financial control, combined with a good agreeable climate made Cyprus the capital for Binary Options, in the same way it did for Forex. Indeed, many comparisons can be made between Binary Options and the Forex industry. Initially, nearly 10 years ago, when the online forex industry started to explode, there was talk that the regulation would kill the industry and reduce the incentives for us traders. However, this wasn’t the case. The bad apples in the industry were nearly all rooted out and ID verification processes and compliance became part of the norm when trading forex. Don’t get me wrong, I have still had some less than satisfactory forex trading experiences despite the mifid regulation – most notably with ecmarkets – who now incidentally operate a binary site – zoneoptions (certainly one to avoid). But I can expect similar experiences as the new regulation comes into force in Binary Options. It will take a while to sort out the rotten apples from the good ones and with 6 months ‘grace’ this wont happen overnight

I currently have a few accounts with Binary Platforms – 1 of which – bancdubinary – applied for the license in Cyprus immediately. Whether more providers will follow suit and apply for licenses or leave Cyprus altogether remains to be seen, but if we look at the Forex industry for guidance as to what will happen, I think we will see most of the companies adhere to the regulation and stay in Cyprus. At the end of the day, the regulation is there for my benefit – having to send in copies of ID and a proof of address means that I am investor protected and there are strict guidelines which are monitored as to where my money is kept and how it is handled. Businesses within the binary options industry will have to keep clients money separately and I, for one, feel more confident and safer about the binary options industry now that regulation is being enforced.

At the moment we traders have to see the effects of the regulation, in particular, which platforms will continue and which will disappear. I am based in the UK, so the talk of allowing US trading doesn’t really affect or interest me. What does interest me, however, is the effect that this might have on payouts. There is gossip on binary forums that payouts and bonuses will be capped/reduced but looking at what happened in the forex industry, payouts actually went up after regulation! So it would be a big surprise if payouts were to be affected negatively now that regulation is introduced

Overall, I am happy regulation has been brought in – it was inevitable really, considering the size and rapid growth of the industry, and the monitoring and regulation of where my money goes should root out the cowboys, whilst not hindering the growth of an exciting and profitable industry, making BO still the quickest and easiest way to trade the financial markets… just now with needed and appreciated controls and monitoring in place. Everyone should look at the regulation of companies and ideally choose a regulated company to trade with. There is plenty of choice and not all companies are based in Cyprus, but be prepared for more ID verification and more procedures, but at the same time, be prepared for a better, more transparent and protected binary options experience.

According to target rate probabilities it is being implied that markets are biased towards further easing at the June RBA meeting. The 90 day bill futures are pricing in a 70% chance that rates will be 3.50% at June meeting. This probability has fallen from its peak on 9 May 2012 when the Aussie 90 Day Bill futures suggested that there was a 92% chance of a 3.50% rate by the expiry of the June contract.

Rate Probabilities - Source: ASX.com

Add the slowdown which is underway in China, European crisis worsening and an Australian economy also showing weakness has and will keep market sentiment weighted to further rate easing in Australia. This environment is bound to keep the Aussie on the back foot and below parity.  Good trading. CF

European indexes extended their losses, as banking shares tumbled 3.4%. The DAX fell .8%, the CAC40 dropped .6%, and the FTSE sank .5%. Greece;s stock market tumbled 3.6%, hitting a 22-year low, and Spain’s IBEX fell 1.6%.

European Banks Continue to Struggle

US markets fared no better. The Dow fell 63 points to 12632, the S&P 500 declined .6% to 1331, and the Nasdaq edged down .3%.

Home builders rallied after the NAGB housing market index jumped to 29, blowing past forecasts for 26, climbing to a 5-year high. Lennar jumped 2.8% and DRHorton cllimbed 2.5%.

Chesapeke Energy sank 5.6% after S&P cut its bond rating to BB- from BB.

Zynga surged 7.8% as investor fever grew in anticipation of Facebook’s IPO this Friday.

Treasuries and Commodities
Bonds settled little changed, with 10-year notes down 1/32 to yield 1.77%, and 30-year closing flat to yield 2.92%.

Crude oil continued to slide, slumping 1.7% to 93.19, and gasoline fell .6% to 2.942. Natural gas bounced 2.8% to 2.50.

Metals posted steep losses. Silver tumbled 2.6% to 2.62, copper fell 1.8% to 3.4895, and gold dropped 1.1% to 1543.20.

Agricultural futures rallied, as corn climbed 2.4%, soybeans advanced 1.9%, and wheat gained 1.7%.

Currencies
The Dollar index climbed to a 4-month high as the Euro zone debt crisis continues to grow. The Euro fell .9% to 1.2717, a 4-month low, and the Swiss Franc dropped 1% to 1.0689. The Pound sank .8% to 1.5965, breaking through the 1.60 level, and the Canadian Dollar dropped .7% to 1.01. Even the Yen struggled, declining .5% to 80.37.

Economic Outlook
Tuesday’s economic data was mixed. Retails sales rose a mere .1%, below estimates for a .2% gain. However, the Empire State manufacturing index surged to 17.1 from last month’s 6.6, blowing past forecasts of 9.3. Business inventories rose .3%, less than expected, and CPI was flat.

Wednesday’s reports will include housing starts, building permits, industrial production, weekly mortgage applications, weekly oil inventories, and the FOMC minutes.

Earnings are due from Abercrombie & Fitch, Deere, Limited Brands, NetEase, Staples, and Target.

-Bradley Welcher

As an aside France GDP came in at 0% growth as expected.

The question remains right now but we shall know the answer in a little over two hours time if Europe is officially in recession as we get the release by Eurostat’s Flash GDP q/q release with markets forecasting -0.2% that would be the official call of a Euro double dip. Maybe Europe can be given a stay of execution on this front as Germany has posted better than expected 1Q GDP as we have just seen and France is stagnate at 0% combining both,  accounts for over half of the Eurozone GDP.

Calling recessions by the text book of 2 negative quarters of GDP is really looking in the “rearview mirror” as it is not forward looking. The biggest issue facing global markets is Europe and it’s continued in ability by officials to solve the Sovereign Crisis which is a vacuum that sucks in all things economic and all things financial.

VIX has spiked but is that it for US equities downside risk?

Equity volatility is expected to be a likely candidate to see an increase as downside protection is likely to be needed as uncertainty continues to mount. Good Trading. CF

European markets tanked, as concerns over an economic slowdown, Greece, and Spain, combined. The CAC40 tumbled 2.3%, the FTSE slumped 2%, and the DAX dropped 1.9%. In Spain, the IBEX fell 2.7%, while credit default swaps on Spain’s 5-year notes spiked to record highs.

US stocks dropped as well, but the losses were more moderate. The Dow fell 125 points to 12695, while the Nasdaq and S&P 500 both shed 1.1%, to 2903 and 1338, respectively. The rise in fear pushed the VIX up 10% to 21.87, its highest leve since January.

VIX Jumps 10% as Fear Grows

Groupon skyrocketed 18.6% ahead of its earnings announcement.

Treasuries and Commodities
Bonds posted large gains, with 10-year notes up 18/32 to yield 1.77%, and 30-year notes up 1 17/32 to yield 2.93%.

Commodities sold off, as China’s latest easing effort was seen as a warning sign of further slowness. In energy. Crude oil fell 2.1% to 94.16, natural gas sank 3.5% to 2.421, and gasoline dropped 1.7% to 2.949.

Copper led metals lower, tumbling 3.5% to 3.5215. Silver sank 2.4% to 28.185, and gold shed 1.7% to 1557.90.

Currencies
The US Dollar benefited from the flight to safety, gaining against most currencies. The Euro and Swiss Franc fell .6%, and the Australian Dollar fell .5% to .9970, slipping below parity. The British Pound managed a small gain of .2% to 1.6100, and the Yen inched up less than .1% to 79.87.

Economic Outlook
Tuesday’s busy economic calendar will include CPI, the Empire State manufacturing index, retail sales, business inventories, and the NAHB housing market index.

Earnings are due from Dick’s Sporting Goods, Home Depot, JC Penney, Saks, TJX, and Valspar.

-Bradley Welcher

What is Mifid?

The Markets in Financial Instruments Directive  – known as “MiFID” is a European Union law that provides harmonized regulation for investment services across the 30 member states of the European Economic Area (the 27 Member States of the European Union plus Iceland, Norway and Liechtenstein). The main objectives of the Directive are to increase competition and consumer protection in investment services. What it actually does, is tighten up the whole new-client process making identification checks part of any new client procedure and reducing the risk of fraud and money laundering.

What does this mean for Binary Options?

It can only be a good thing for the ever expanding binary options industry. The explosion in the amount of platforms and brokers has brought about one or two bad practices and attracted the eye of the regulators. Not all brokers are registered in Cyprus but many are – attracted by the lax income and financial laws.  All entities based in Cyprus, which offer investment services, related to binary options will now have to submit applications to obtain a license to operate as a Cyprus Investment Firm (CIF). All companies that already have the authorization as a CIF may continue to offer binary options services, but they need to immediately inform CySec in writing as to whether or not they intend to or are already performing binary options related activities. All brokers and investment intermediaries, which currently offer binary options under the banner of “other services”, will have to apply for modification of their CIF license. All investment firms performing binary options related activities will have to submit an application for CIF license  within fifteen days from the date of May 3^rd’ announcement and to duly inform CySec in writing of their intentions. CySec also states also that within 6 months from the date of the announcement, all companies should submit an application for CIF authorization. All entities which will not submit their intentions in writing will be forced to cease their binary options related activities related to binary options.

Within the first 48 hours, Cysec announced that 3 businesses had already applied for their license with the general feeling that most based in Cyprus will either follow suite or suddenly relocate themselves in similarly lax financial and tax climes like that of the British Virgin Islands, where some binary options brokers are already based.

What does this mean to traders?

To traders, this can only be a good thing. Some of the rotten apples will be sorted out and the regulation imposed will now make the whole binary options a transparent and monitored industry. ID checks will root out some of the fraud that sadly happens whilst regulation will make companies more accountable and a lot more transparent in the way they promote and the way they operate. Companies will have to be more compliant in everything they do and investors now enjoy protection under Mifid laws, making this all in all a win-win situation for binary options traders. There are still plenty of binary options providers offering protection and now it will mean that an investor will have much more choice in whether or not to use the services of regulated and protected binary options entity.

The biggest question is if Greece exits the Euro what does this do to Spain and Italy? The answer to this question will give better understanding as to how markets could react.

The markets are a little over 2 years on this crisis and in essence the ECB, IMF and all things politics are not any closer to solving the crisis. The Euro area finance ministers are scheduled to meet today in Brussels at 4pm GMT.

This is the second week of rising concerns over the Euro crisis as voters across Europe seem decidedly more in favor of anti austerity. To slap more fuel to this election fire even the German solidity of the CDU (Christian Democrats) were delivered a message in the most populous state of North Rhein – Westphalia (NRW) election where Merkel’s CDU appears to be defeated by Social Democrats or SPD which is a centre left party. The CDU vote of 26% was down from 35% in 2010 worst result for the CDU in this state since WWII. Typically, this state has a history of influencing national politics as well.

At What Cost?

Markets de-risking is likely to continue as the European Crisis is bound to get messy as talk continues to gain moment on the exit of Greece from the Euro. Euro rallies are there to be sold! Good trading. CF

An afternoon rally lifted European markets, thanks to upbeat consumer confidence data from the US. The DAX rallied 1%, the FTSE climbed .6%, and the CAC40 settled flat. Bucking the uptrend, Greece’s main index tanked 4.5%, after the parliament was unable to form a coalition.

US stocks settled mixed, surrendering earlier gains. The Dow declined 34 points to 12821, the S&P 500 dropped .3% to 1353, while the Nasdaq closed f

Dow Gives Up Early Gains

lat.
JP Morgan plunged 9.3% to 36.96 after revealing that it had lost more than $2 billion in a failed hedging strategy. The news pulled down the financial sector, with Citigroup and Morgn Stanley down 4.2%, while Goldman Sachs dropped 3.9%.

Nvidia jumped 6.4% after reporting earnings which beat estimates, and raising its outlook.

Treasuries and Commodities
Bonds rose, with 10-year notes up 8/32 to yield 1.84%, and 30-year notes up 25/32 to yield 3.01%.

Crude oil fell .95 to 96.13, while natural gas gained .8% to 2.509.

Currencies
The Dollar traded moderately higher against global currencies, amid concerns of a China slowdown. The Pound fell .4% to 1.6068, and the Australian Dollar slipped .3% to 1.0024. The Euro and Swiss Franc both eased .1%, and the Yen closed down 4 pips to 79.93. The Canadian Dollar managed a gain of .2% to 1.0010, following the release of upbeat employment data.

Economic Outlook
Consumer sentiment exceeded forecasts, climbing to 77.8 from 76.4, while PPI slipped .2%. Analysts had expected both figures to remain flat.

No major economic reports are due on Monday. Earnings are scheduled for Agilent and Groupon.

In the latest news from Greece, socialist party leader Evangelos Venizelos failed to form a coalition government after hosting last-minute talks. This news all but crushing earlier hopes that the debt-ridden nation would avoid another round of elections next month. According to the US Labor Department, producer prices posted a surprising drop in April as energy costs declined.

THE WEEK AHEAD

MONDAY:

TUESDAY: CPI, retail sales, Empire state mfg survey, Treasury international capital, business inventories, housing market index

WEDNESDAY: Weekly mortgage apps, housing starts, industrial production, oil inventories, FOMC minutes

THURSDAY: Jobless claims, Philadelphia Fed survey, e-commerce retail sales, leading indicators

FRIDAY:

Euro zone issues caused t othe US Iindexes to close lower thiss week. The Dow Jones lost 34.44 points, to close at 12,820.60. The S&P 500 lost  0.34 percent, to close at 1,353.39. The Nasdaq rose 0.18 points to close at 2,933.82 points.

DJIA CHART

FOREX

The dollar’s recent performance is impressive. The Dollar Index has risen 1.9 percent to its highest weekly close since the middle of December. Looking at currency’s performance in specific corners of the market, we find the EUR/USD is below 1.3000, AUD/USD is at its lowest level for the year and the Dollar has even been able to muscle gold to a correction of a bull run that goes back nearly three years. The euro is the most fundamentally loaded currency this coming week. Through the close of this past week, the currency won temporary stays on two of the most critical threats to regional stability: the Greek election turmoil and Spanish financial troubles. Both areas can quickly flare up. For Greece, the short-term concern is creating a new government and seeing if it backs the austerity measures or withdraws from EU and suffers a default. As for Spain, the relief in the Bankia nationalization has been muddied by the Economic Minister’s announcement that another €30 billion will be needed to be set aside for further losses of other Spanish banks.

EUR/USD Chart

COMMODITIES

London brent crude for Junefell to $111.40, but did not go back above $113.18, needed to avoid a weekly loss.

Crude lost 0.95 to close at $96.13. This is now below the 200-day moving average of $96.27. Gold fell 0.8 percent to close at  $1,5780.25. For the week, gold saw a 3.7 percent loss. Yhis is the Yellow metals worst performance since the week of Dec. 18 last year when it lost nearly 7 percent.

Oil Chart

EQUTIES

Arena soared after the drugmaker’s experimental obesity pill won an FDA panel’s support.

Meanwhile Facebook’s record IPO is already oversubscribed. Shares are expected to begin trading on May 18. Nordstrom lost after the department-store chain missed Wall Street expectations. And Nvidia surged after the chipmaker reported revenue and outlook which topped estimates.

European markets closed higher, recovering from earlier losses, as rumors of a coalition deal in Greece helped ease anxiety. The DAX climbed .7% to 6518, the CAC40 rose .4%, and the FTSE gained .3%. Banks rallied 4.2%, rebounding after Wednesday’s 3.3% loss.

In the US, the Dow rose 20 points to 12855, snapping a 6-day losing streak. The S&P 500 gained .3% to 1358, while the Nasdaq closed down 1 point to 2934.

Dow Snaps Losing Streak, Rising 20 Points

Cisco tumbled 10.5% to 16.81 after issuing disappointing guidance, even though earning beat expectations. Juniper fell 4.9% and Salesforce.com tumbled 9.1%, as fears of a slowdown hit the sector.

Kohl’s fell 4.3% after reporting weak earnings, while News Corp. rallied 4.9% after beating forecasts and announcing a new $5 billion buyback plan.

Treasuries and Commodities
Bond prices fell with 10-year notes down 8/32 to yield 1.88%, and 30-year notes fell 18/32 to yield 3.05%. In the UK, 10-year notes sank .82 to yield 1.99% and 30-year notes dropped .945 to yield 3.26%.

Crude oil closed down 7 cents to 96.74, extending its losing streak to 7, and gasoline fell .9% ti 2.998. Natural gas rose .5% to 2.476.

Metals settled mixed as copper gained .6%, silver fell .6%, and gold closed flat at 1594.

Cotton plummeted 4.7%, and corn tumbled 3.3%, while soybeans rallied 1.8%.

Currencies
The currency markets traded in a narrow range on Thursday. The Euro, Swiss Franc, British Pound, and Canadian Dollar all edged up .1%. The Australian Dollar climbed .6%, lifted by upbeat employment data. The Yen dropped .4% to 79.99.

Economic Outlook
Weekly unemployment claims improved by 1K to 367K, better than the 371K forecast. The US trade deficit widened to $51.8B, blowing past estimates of $49.8B, jumping $6.4B over the last month. Import prices fell .5%, more than the .1% forecast.

Friday’s economic calendar will include PPI and consumer sentiment.

Earnings are due from Dillard’s, Nissan, and Nvidia.

-Bradley Welcher

China saw a weakening in its trade data yesterday with imports in April growing 0.3% well below market forecasts of 11% while the all important Chinese exports managed 4.9% growth but also well below market consensus of 8.5%.

Exports are a big factor for China’s economic growth – China as most know is export dependant. China has expressed its desire to shift away from this model of being export dependant. Maybe the shift is late in coming as clearly Europe which is China’s largest trading partner with 2011 EU imports from China topping €292.1bn will impact its economic growth prospects. Clearly, Beijing will be concerned about recent shifts in the Political landscape in Europe.

For the global economy the headline number of imports is also a worry as clearly China’s manufacturing is undergoing a contraction which suggests real economic weakness. There are signs that any area of strength in imports comes via state lead spending on infrastructure materials as it is largely focused on natural resources.

Goldman Sachs Commodity Index -1.4% YTD

In summary, the market approach is that commodity markets and risk assets maybe in for a bumpy ride and volatility maybe just around the corner. Downside risk is likely to continue on EUR and carry trades. Good trading. CF

European banks tanked, dropping 3.3%, although the major European indexes closed mixed. The FTSE fell .4%, the CAC40 slipped .2%, while the DAX gained .5%.

US stocks closed lower, but once again managed to erase most of their early losses. The Dow fell 97 points to 12835, extending its losing streak to 6 days. The Nasdaq fell .4% to 2935, and the S&P 500 skidded .7% to 1355.

Dow Continues to Slide

Macy’s fell 3.7% despite reporting earnings which beat estimates, after the company failed to raise its full-year profit forecast.

MetroPCS soared 17.8% on news the company is exploring a merger with T-Mobile.

Treasuries and Commodities
10-year notes closed up 3/32 to yield 1.83% following a $24 billion auction, with a high-yield of 1.855%, and a bid-to-cover ratio of 2.90. 30-year notes closed flat, with the yield at 3.03%.

Crude oil slipped for its 6th straight day, settling down .5% to 96.55. Gasoline gained .7% to 3.0154, and natural gas rallied 2.1% to 2.443.

Metals traded lower, as gold fell .8% to 1591.70, silver dropped .5% to 29.30, and copper shed .4% to 3.6635.

Wheat tumbled 2.4%, and corn fell 2.5%.

Currencies
The Euro fell below 1.30 to 1.2941, down .5% as mounting concerns over Greece and Spain continue to pressure the single-currency. The Swiss Franc also declined .5% to 1.0776, continuing to move in lock-step with the Euro. The Pound eased .1% to 1.6141, the Australian Dollar fell .6% to 1.0056, and the Canadian Dollar slipped .2% to 1.0013, crossing below parity. Bucking the downtrend, the Yen edged up .3% to 79.62.

Economic Outlook
A report released on Wednesday suggests Spain will need another $45 billion to aid its banking industry, implying another bailout will be needed.

Wholesale inventories rose by just .3%, less than the .6% forecast, suggesting demand is growing. Weekly mortgage applications rose last week for its 3rd straight week.

Thursday’s reports will include international trade, import prices, and weekly unemployment claims.

Earnings are due from Kohl’s, MBIA, Nordstrom, Sony, and Sotheby’s.

-Bradley Welcher

A Greek exit from the Euro in the long run is best for the Greek people as it would mean they are not saddled with a currency union that is not providing economic stabilization.  On one hand maybe it is better for Greece to default like Brazil (1990), Argentina (2002-2005), Russia (1991, 1998) and many other sovereign nation’s have done in the past. This will allow themselves the capacity to then rebuild and address the structural problems to promote economic growth.

The reason why Greece has been drawn into this tragedy is the “European Establishment” is stubborn on the dream of a monetary union. The model of German fiscal discipline may not be suited to the Greek people and if that is the case then there is no choice but to leave the EU if that is the case then the world financial institutions may be delivered a blow.

Euro or Drachma?

Market view on this is that there is still downside risk and rallies in EUR should be used to advantage. The caveat is that this may force the hand of QE3! Good trading. CF

The newly elected leftist leader of Greece, Alexis Tsipras rejected the terms of the international Greek bailout, raising the likelihood the heavily indebted country will be unable to raise further capital from the European bailout funds. European markets sank, as the CAC40 tumbled 2.8%, the DAX slumped 1.9%, and the FTSE fell 1.8%. In Greece, the Athens General Index dropped 3.6% to 620.52, its lowest level since 1992, extending Monday’s steep 7% drop.

US Stocks closed down, but fared much better than their European peers. The Dow had dropped as much as 198 points in the early morning, but mostly recovered to close down 76 points to 12932. The S&P 500 and Nasdaq both shed .4%.

Wendy’s sank 4.1% after earnings fell short of estimates, and McDonald’s slumped 2.1% on disappointing same store sales. Wynn Resorts fell 4.8%, on weak profits due to weak demand in its Las Vegas casinos.

Treasuries and Commodities
Bonds rose, with 10-year notes up 8/32 to yield 1.84%, and 30-year notes up 14/32 to yield 3.04%. The Treasury auctioned $32 billion in 3-year notes, with a high-yield of .362% and a bid-to-cover ratio of 3.65.

Metals tanked, as copper sank 2.3% to 3.685, and silver dropped 2.1%. Gold fell 2% to 1606.70, briefly dropping as low as 1595.50, their lowest level in 4 months.

Gold Dips Below $1600 as Metals Slide

Natural gas rallied 4.5% to 2.443, and gasoline climbed 1% to 3.0033, while crude oil fell for its 5th straight do to 97.29, down .7%.

Currencies
The drop in metals pressured the Australian Dollar, which fell .7% to 1.0114, due to its position as a major metal exporter. The Euro and Swiss Franc both declined .6%, and the Canadian Dollar slipped .3% to .9985. The Pound and Yen both closed up fractionally.

Economic Outlook
The possibility of a Greek default may become a reality if the newly elected government can form a coalition, and the markets will be very sensitive to the ongoing political developments.

The TIPP economic optimism index unexpectedly fell to 48.5 from 49.3, remaining below the key 50 mark.

Wednesday’s reports will include wholesale trade, weekly mortgage applications and weekly oil inventories.

Earnings are due from Activision, AOL, Cisco, Macy’s, Priceline, Tesla Motors, and Toyota.

-Bradley Welcher

BOJ looked to be stepping into the market as Tokyo Stocks plunged 2.8% and gapping down from their close on Friday. Europe has spooked a lot in the markets and Japan is no exception to this rule as there is clear danger still for global markets as the situation in Europe worsened as voters are starting to express clear dissatisfaction with the political and financial systems that are the root cause.

The Bank did say that these purchases where in keeping with the banks broad goals of interest rates and reducing risk premiums. Wink, wink they say it is not about supporting financial markets.

Some may question the BOJ effectiveness any longer in their intervention attempts as equity markets around the world will continue to be broadly under pressure from what is going on in Europe weather its  Bank recapitalization or Anti Austerity measures the situation is set to keep markets on the back foot.

Yen vs Nikkei relationship.

Good Trading. CF

Nikkei Tumbles 2.8%, adding to its Recent Slide

European markets gained, but volume was light due to a bank holiday in the UK. The CAC40 rallied 1.7%, and the DAX edged up .1%.

US stocks ended mixed, as the Dow declined 30 points to 13009, while the Nasdaq and S&P 500 inched up fractionally.

Vertex pharmaceuticals surged 55% after reporting a successful clinical trial for its cystic fibrosis drug.

Treasuries and Commodities
Bonds closed little changed, as 10-year notes closed flat, while 30-year notes ticked up 3/32 to yield 3.07%.

Crude oil declined .4% to 98.06, while natural gas climbed 2.4% to 2.333. Gasoline edged up .2% to 2.9803.

Copper advanced 1% to 3.757, while precious metals dropped. Silver fell 1.2% to 30.07, and gold declined .4 to 1638.70.

Currencies
The Euro fell as low as 1.2962, but mostly recovered to close down .2% to 1.3052, while the Swiss Franc slipped .3% to 1.0863. The Pound and Canadian Dollar gained .2%, and the Australian Dollar inched up .1%. The Yen eased fractionally to 79.90.

Economic Outlook
Consumer credit blew past estimates, surging to 21.4B from last month’s 9.3B. The increase was the largest since November 2001.

The election results from Greece could have a significant impact on the Euro zone, since the key players involved in passing the austerity measures failed to gain reelection.

Tuesday’s lone report will be the NFIB small business index, which is expected to rise moderately from 50.3 to 49.3.

Earnings are due from DirecTV, HSBC, Disney, Officemax, Tenet Healthcare, and Wendy’s.

-Bradley Welcher

Some in Greece have said that this is their 1930’s where people have no jobs, businesses are closing and people line up just for bread. The markets are empty as people have no money to spend this is the postcard from Greece right now.

Citizens of nations are starting to realize that these austere measures are in fact pushing countries from recession into depressions. The power shifts and changes in most cases from pro Austerity parties to Anti Austerity is becoming more apparent.

French President Elect Francois Hollande has defeated Sarkozy on a pledge to push for less austerity and more growth. The story is not over yet in France as the lower house needs to be voted on in 5 weeks time which would complicate things if Sarkozy’s Union for a Popular Movement was to keep its majority there.

If citizens make enough noise maybe the politicians will hear if only for fear of losing the seats they sit on. If politicians had the real interest of economies at heart the European Monetary Union would have been history a long time ago. The current model of countries having sovereign fiscal policy but only one monetary policy just does not work.

EUR/USD 1.30 is the battle line!

The market view here is if it wasn’t for the US printers the Euro would have suffered many times more. Downside risk is high for EUR and EUR crosses this one is all about timing it is not a matter of “if” but “when”. Good trading. CF