The Banking and Strategy Initiative

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Mid Market Commentary (Spanish Bailout?) – Euro breaks down in a sweat

As the conditions of the EU became clear after the market open, commodities responded in kind to the fracture of the Euro with a sudden risk off that plunged nascent Copper, Natural Gas ( ni $2.2 ) and many other charts including Gold, Silver and of course the Euro itself. it seems like there are lower Oil prices in store. For equities that started the day on a strong footing, it meant Dow is down 3 tenths of a percent at 11 AM while S&P is down 4 points

Shanghai last week had trading firms refusing to deal with LME but LME Copper kept falling this Monday after a good recovery for the first two hours when The Euro’s report on monitoring of the Spanish bank bailout funds use by the Troika itself made the wires. Though much more by way of conditions was expected, that the Financials could also not take off meant the market was first and foremost interested in trading the good news of the Spanish bank bailout and is now possibly looking at future events as higher tail risk events ( though still improbable and could probably be more resilient at lower levels)

Direct Troika supervision means that the bailout will be messy with frequent penalties and questions to the usage of funds delaying the actual infusion at the onset itself from the Greek example. But one would have thought that is for the declining Euro over a month or two to below 1.20 levels. Seemingly as the JPY and the AUD ran down the Euro in early trades already, the disease has spread thru US equities and global commodities as news of the Euro now don to 1.25 levels from its post bailout announcement highs in Asia earlier in the day. Mariano Rajoy had earlier announced, albeit erroneously that as the payment would be the responsibility of the Spanish government, it will be in total control over FROB’s disbursal of the EUR 100 B requested. The ECB had earlier announced that it will fund up to EUR 100 B for rescuing Spanish Banks

July Gas futures are back to the bare bottom $2.2 per mmbtu

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