Overnight and in to opening trade

Some of the most interesting news overnight surprisingly came from China. As Reuters reports:

 China on Monday offered $43 billion to the IMF's crisis-fighting reserves, joining other major emerging markets in pledging new funds to shore up the global financial system while demanding reforms to give the developing world more clout at the IMF.

The leaders of Brazil, Russia, India, China and South Africa, meeting before a Group of 20 summit in Mexico, said they "agreed to enhance their own contributions to the IMF."

They sought to tie the funds to long-delayed reforms that would give the developing world more say at the Washington-based Fund.

"These new contributions are being made in anticipation that all the reforms agreed upon in 2010 will be fully implemented in a timely manner, including a comprehensive reform of voting power and reform of quota shares," the BRICS leaders said in a joint statement.

G20 finance ministers agreed in April to give the IMF $430 billion in new resources, but the breakdown of contributions has not been formally announced. The bulk of the extra IMF money will come from Europe, while the United States, which would need approval from a deeply split Congress, is not contributing.

Emerging economies have long demanded more say at institutions like the IMF to reflect their growing clout. Their frustrations have grown with the likely delay in implementing the 2010 deal that would boost their voting power and make China the third-largest voting member of the IMF.

Spanish 12-18 month bond auction goes through relatively smooth with a firmer bid to cover than the last auction, note the 12-18 month debt falls within the 3 year LTRO loan window. Yields did come in above 5% on both issuances which is the highest since 19997, about 2% higher than the same auctions in May. Thursday Spain will have a tougher test as they try to sell 2, 3, and 5 year bonds, some of which fall outside of the LTRO period.

As mentioned yesterday when talking about news that Spain may actually need $150 bn Euros (above the $100 bn "Bazooka effect" Finance Ministers agreed to) I said, "Expect this number to continue higher as the snowball effect is in full play."


True to form, ING says overnight that Spain may in fact need ANOTHER $250 bn Euros!!! First the $100 bn was supposed to be more than enough to settle the markets, yesterday that went up to $150 bn, today $350 bn.

UK CPI came in at 2.8% for May on a year on year basis which is lower than the consensus view of 3%. This enhances expectations for QE from the Bank of England in July.

The German ZEW Survey of economic sentiment crashed and burned at -16.9 on expectations of +2.3 which is down from 10.8 previously. This print is the fastest rate of collapse since 1998!

There are unconfirmed rumors that the ECB is active in the European secondary bond market today, trying to support yields as Spanish 10 years pulled back toward the 7% level, this was also around the same time the debt auctions were concluded in Spain.

In the US, on a light economic calendar, we saw the Housing Starts released this a.m. with a VERY mixed bag. Permits gained while actual starts saw the largest drop since last year. Permits rose to 780k from 723k (annualized basis) which is the highest since Sept of 2008; consensus was for a 730k print. Actual starts dropped from a revised 744k to 708k. Actual completions dropped from 667k to 598k.

Released On 6/19/2012 8:30:00 AM For May, 2012

	Prior	Consensus	Consensus Range	Actual
Starts - Level - SAAR	0.717 M	0.720 M	0.700 M to 0.750 M	0.708 M
Permits - Level - SAAR	0.715 M	0.736 M	0.710 M to 0.770 M	0.780 M

As for the F_O_M_C,  their meeting starts today and concludes with the policy statement tomorrow.
Market hopes are the F_O_M_C  will announce a new LSAP program. If the F_O_M_C fails to deliver or makes a less spectacular move, like expanding Twist or raising the maturity of bonds for sale from 1-3 year to 1-4 year, the market will likely be disappointed.


As for ES overnight and Euro-Dollar...

 ES was looking bad early last night, the European open is at the green arrow, you can see obvious volatility around the EU open, moving forward...

 This is the second half of the chart as the entire session doesn't fit on 1 chart, we saw some positive divergences just prior to the EU open and an hour after the EU open, likely on the Spanish bond auction being considered "successful" bases on the bid to cover, not the yields. 3C is moving in line with ES in to the open and currently, however at a slightly negative position (not quite confirmation).

 A closer view in to the 9:30 NY open, ES appears on this chart to be almost perfectly in line, however the longer trend reveals 3C is slightly lower than confirmation.

 The EUR/USD pair since yesterday's 4 p.m. close to this morning's 9:30 market open.

The pair's trade since the open of FX trade this week, we are now back above the major resistance level, this is the area a short squeeze in the Euro becomes increasingly likely if the Euro can hold above it and rise, putting pressure on the shorts.

Market Updates coming up next...