The Banking and Strategy Initiative

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US Morning Report: US markets down for fifth day in a row, the Deal Valley and JP Morgan hopes intact

In European trading first, Germany was a tad up even as the resurgent British and French bond markets could not keep equities up. While France has joined the elite 3 in the Eurozone again as safety zones, we are riooting for tialy as many others with italian yields down below the 6% mark after Mariano Rajoy announced another EUR 65 B in austerity measures including higher social taxes and budget cuts to match the EUR 30 B provided by the Eurozone.

Spain is on the line however as much of the junior debt held by banks has been sold down to retail investors and there is no honest way out except for cutting the face value of debt returnable to investors for the bailout. However where retail investors are involved such haircuts will likely be avoided and as the Euro 17 continue to deal ith Spanish banks only thru the sovereign guarantee of spain, the direct intervention by EFSF and ESM would still hold Spanish government liable and increase its public debt.

Meanwhile back in the US, The Deal Sun shines in Sun Valley at the annual Allen and Co conference that began yesterday night with speculations around Twitter and Google and many pursuing the current digital spat between Viacom and Directv to a resolution at the Conference as well. US Exports rose by $400M over March and Imports shrunk a further $1.6 B to a facesaving $48B Trade Deficit for May, The services surplus increasing to $14.8B   Industrial supplies’ exports lag and Food and beverages exports lead even as drought hit Corn supplies reduce by 37% and prices firm up according to the latest USDA report hich may be further upgraded

BRICs were in the news tracking a recovery even as China sentiments are seen improving on the offtake of natural Gas and thus most other basic inputs and even China’s industrial Production a s power demand contraction in South China has been held as the most important indicator of the contraction maybe China can reire these shut Coal plants to work with Natural Gas for new demand. Brazilian retail sales were up 8% don from double digits last month and Indian money supply healthy at above 13%. Korean, Japanese and Australian production and emplyment/sentiment data were also slightly positive, while Malaysian production shone in Asia at 8% against 3% as late as last month

JP Morgan has however stabilised and ticking up from $34 levels as Jamie Dimon gets ready to spend two hours with analysts on Friday morning with the results release. The bank seems to have pegged the final whaling tallya at just $5 B leaving it with probably more than $2 B in profits tomorrow.

German yields seem headed for a bottom at 1.3% , as they compete with US Treasuries in demand (mathematically) even as US 3 year auction yesterday as a little eaker in demand from international investors, yet a more than successful one with near zero yields less than 0.4%

Unemployment benefits will be cut by 30B Euros in Spain yet the Euro is looking to tumble below $1.20 even as the Pound Sterling continues to climb. The Aussie and the loonie have topped out however at comfortable enough levels of 1.02/1.03 while dangers lurk around the Yen, currency strengthening to near 78 levels to the Dollar.

US Trade surpluses increase with  Singapore ($1B), hongkong and Australia ho ship to the West Coast and deficits increased with China ($26B ), Germany ($4.9B) and Mexico($6.4B)  among others . Deficit with Canada decreased to $2.2 B

Advanced Technological imports increased by $3 B to add to the deficit at $8.4 B this May US hole sale Sales dropped and inventories rose together for a Stock to Sales ratio  increase to 1.18 feeding the ECRI opinion that we are already in the middle of a recession but refineries were workign overtime to reduce the record stock of Crude by another 4.7 M Barrels. Gasoline an d Distillates inventories started ticking up again though and Consumer spending may go down again in June and July unless more price cuts are seen at retail points of purchase


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