Overnight and in to the open

It seems to be all about commodities and the Middle East...


Overnight the Chinese "Securities Journal" reported the potential for further Chinese Central bank (PBoC) Reserve Ratio Requirement cuts. We have been on top of this Chinese story since last year, months before their first PMI data showed they were in trouble, it was obvious in the way commodities were trading. Further evidence comes from a member who frequently travels to China, companies his company does business with are feeling the pinch and taking some drastic measures.

Chinese Services PMI were also released overnight with a slight improvement over the prior month and above the key 50 level which is the level that divides growth from contraction.

In the EU, Bob Diamond, the CEO of Barclays has resigned amidst the scandal engulfing BCS the COO also joined him in resignation ; There are stories that the BOE was actually involved, pressuring Diamond to resign as fears grew that Diamond might spill some sour beans taking down much of the UK political establishment. BCS is pretty much unchanged on the US open, but swung from down 3% to up 3% in European trade. Lloyds, RBS and HSBC are underperforming in European trade as the investigation in to the LIBOR and Banking Standards scandal continues.

Speaking of the BOE, the English Central Bank has a rate decision due out Thursday of this week.

As mentioned Sunday, watch Finland and the Netherlands and the entire ESM structure as disagreements between Northern EU and Southern EU countries continue. In the latest news from Finland (and not unexpected as this has been mentioned before), Finland want to secure collateral against loans to the Spanish banking system; so keep an eye on those Spanish 10-year yields as it seems the entire "Bazooka" proposal remains nothing more than that.

EU data saw weak Construction PMI, which was offset by better than expected Mortgage Approvals.

Oil gained significantly today even though the $USD was stronger yesterday and somewhat flat today, apparently on several events and news items, one coming from the NYT:

U.S. Adds Forces in Persian Gulf, a Signal to Iran

"The United States has quietly moved significant military reinforcements into the Persian Gulf to deter the Iranian military from any possible attempt to shut the Strait of Hormuz and to increase the number of fighter jets capable of striking deep intoIran if the standoff over its nuclear program escalates."


Furthermore...


"Iran said on Tuesday it had successfully tested medium-range missiles capable of hitting Israel in response to threats of military action against the country, Iranian media reported. The Islamic Republic announced the "Great Prophet 7" missile exercise on Sunday after a European Union embargo against Iranian crude oil purchases took full effect.


And...

Turkey's armed forces command said on Tuesday it had scrambled F-16 fighter jets for a third consecutive day on Monday after Syrian transport helicopters were spotted flying near to the Turkey-Syrian border, but there was no violation of Turkish airspace.

It said in a statement a total of six jets, four from a base in Incirlik in the south and two from Batman in eastern Turkey were scrambled in response to Syrian helicopters flying south of the Turkish province of Hatay, within 1.7-4.5 nautical miles of the Turkish border

And from Stratfor, the newest movements us US Naval Assets...

Apparently my closing of USO calls on June 29th was a bit early, but the profit and what we knew then, I'm not shedding any tears.

Over 100% profit

As for ES and EUR/USD...

 ES pretty choppy overnight, the European open is at the green arrow.

 ES with the EU open to the US open at the white arrow. Before the US open, ES had moved from the 4 pm close yesterday of 1359.50 to the 9:30 US open at 1359.75, pretty much unchanged.

 The Euro since start of FX trade this week has lost important support which is also where a Euro short squeeze becomes more likely.

Since yesterday's 4 p.m. market close the Euro is pretty close to unchanged so we'll take a look at USD denominated assets moving against the legacy arbitrage correlation such as the gap up in gold and oil as well as the opening indications market update.