World economy talk

[uls]

Syria isnt as important as Libya

Syria oil production is less than 500,000 barrels per day

and unlike Libya, Syria produces heavy sour crude

Libya produces light sweet crude (Libyan crude is one of the highest quality crudes in the world)

light sweet crude is more sought after than heavy sour crude

light sweet crude has low sulfur, is easier to process, yields more light fuels

there's more demand for light sweet crude than heavy sour crude. there are less sources of light sweet crude. heavy sour crude is everywhere

so a possible Syria shutdown wont have much of an impact on oil prices

my bet is there will be no NATO military intervention in Syria. the West won't bother with Syria

--

Brent $126

[uls]

speculators still net long WTI crude

[Monseratto]

http://www.bloomberg.com/news/2011-0...-may-slip.html

Crude Oil Drops From 31-Month High on Signs China’s Fuel Demand May Falter
By Ben Sharples - May 2, 2011 8:52 AM GMT+0800

Oil dropped from the highest since September 2008 in New York on signs China’s economic growth may moderate, tempering fuel demand in the world’s second biggest crude-consuming nation.

Futures fell as much as 0.8 percent after a Chinese manufacturing index declined more than forecast in April. Asian oil demand growth will slow in the second half of this year as fuel prices hurt consumers, JPMorgan Chase & Co. said April 28. Crude advanced 6.8 percent last month, capping the longest monthly rising streak on record.

“Things are slowing down in the growth economies and that should also slow the consumption of crude,” Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney, said by telephone today.

Crude for June delivery slipped as much as 93 cents to $113 a barrel in electronic trading on the New York Mercantile Exchange, and was at $113.57 at 10:46 a.m. Sydney time. The contract rose $1.07, or 1 percent, to $113.93 on April 29, the highest settlement since Sept. 29, 2008. Prices are 31 percent higher the past year.

Stock markets are closed in China, Hong Kong, Malaysia and Singapore today for a holiday.

Brent crude for June settlement slid 42 cents, or 0.3 percent, to $125.47 a barrel on London’s ICE Futures Europe exchange. The contract advanced 87 cents, or 0.7 percent, to close at $125.89 on April 29.

[uls]

Osama bin Laden is dead

killed by US airstrike more that a week ago

waited for positive DNA match

[Monseratto]

http://www.reuters.com/article/2011/...71H0EB20110502

Stocks rise after news of Bin Laden death; oil slides

SYDNEY (Reuters) - The dollar rebounded from three-year lows and U.S. crude slid more than 1 percent on Monday on the back of news that a U.S.-led operation killed Osama bin Laden in Pakistan.

U.S. stock index futures added to gains, while U.S. Treasury yields rose across the curve after U.S. officials said the body of Al Qaeda's elusive leader has been recovered by U.S. authorities.

"By lowering national security risks overall, this is likely to bolster equity markets and lower US Treasury prices in a reverse flight to quality movement," said Mohamed El-Erian, Chief Executive Officer and Co-Chief Investment Officer at PIMCO, which oversees $1.2 trillion assets.

"Oil markets are likely to be the most volatile given their higher sensitivity to the tug of war between lower risk overall and the possibility of isolated disturbances in some parts of the Middle East and central Asia," he said.

U.S. crude fell 1.3 percent to $112.39, while U.S. stock index futures rose 0.9 percent.

U.S. Treasuries fell, pushing yields higher across the curve. The 10-year yield climbed 2.4 basis points to 3.314 percent.

Earlier, a 10 percent slide in silver highlighted worries that other overbought assets may be vulnerable to sudden sell-offs.

Financial markets in China, Hong Kong, Singapore, Malaysia and Thailand were all shut on Monday for public holidays, a factor seen contributing to thin trading conditions that could exaggerate price action.

Japan's Nikkei average .N225 rose 1.0 percent, South Korea's KOSPI .KS11 put on 0.9 percent, but Australia's S&P/ASX 200 index .AXJO slipped 0.5 percent.

MSCI's gauge of Asian stocks excluding Japan .MIAPJ0000PUS struggled to make further gains, having reached a three-year peak last week. It was up 0.08 percent at 506.62.

Silver skidded about 10 percent to a low of $42.58, well off a record high of $49.51 set on Thursday. Gold fell to $1,546 from an all-time high of $1,575.79.

"If adjustment is confined to just silver, it won't be a big deal," said Koji Fukaya, chief strategist at Credit Suisse in Tokyo.

"But if this moves spills over to other commodities, that could certainly hurt commodity currencies, such as the Australian dollar and the Canadian dollar. And we could see a rebound in the U.S. dollar."

[uls]

from the article above:

Silver skidded about 10 percent to a low of $42.58, well off a record high of $49.51 set on Thursday.

the sell off in silver happened hours before the bin Laden news

CME increased silver margin whick took effect after last Friday close

MF Global increased silver margin, then Think or Swim also increased silver margin

that rattled those using margin accounts

when New Zealand opened Monday -- massive silver sell orders

see the vertical dive:

[Monseratto]

Oil isn't buying bin laden euphoria...

NYMEX Crude



Nymex Crude 1 year

[uls]

the bin Laden rally fades

ES

[tidus1203]

Next in line for European bailout?

Madrid, Spain (CNN) -- Spain's unemployment rate rose nearly a point to 21.29%, with 4.9 million jobless for the first quarter of 2011, the government reported Friday, as the prolonged economic crisis continues to squeeze the nation.
Some analysts had predicted the number of jobless might surpass 5 million. But while that didn't happen, the latest statistics were another blow to the economy and to the embattled socialist government.

http://edition.cnn.com/2011/WORLD/eu....html?hpt=Sbin

[tidus1203]

Silver is getting slammed more than 5.5%...

Other commodities are also down but everyone is looking at Silver...

[uls]

^^^

check out what happened to WTI crude



then look at the US 10 yr treasury yield



it's showing risk aversion

[uls]

Phils. April Inflation 4.5%

core inflation +3.8%

[uls]

ECB meeting later

could signal another rate hike

---

i lost track of how many times the CME increased silver margin the past days

http://www.reuters.com/article/2011/...7437XU20110505

Silver margins surge 84 percent in 8 days

NEW YORK/BANGALORE | Wed May 4, 2011 11:04pm EDT
(Reuters) - The CME Group (CME.O) sharply raised silver futures margins for a fourth and fifth time in under two weeks, an 84 percent rise in trading costs that has helped provoke a nearly unprecedented sell-off.

[uls]

ECB -- no signal of rate hike next month

euro vertical drop

[tidus1203]

Commodities are slammed heavily especially SILVER. Oil is also being sold, WTI down to $105...

The Euro is also sold 100 pips after Trichet didn't mention the magic word "STRONG VIGILANCE!" And by saying that he trusts Timothy Geithner and Ben Bernanke with their "STRONG DOLLAR POLICY"? (he must be kidding himself hehe)

[tidus1203]

Also bad JOBLESS CLAIMS numbers from last week is weighing on selling pressure on equities...

The correction we have been looking for... Sige BABA PA!!!!

[uls]

broad commodities selloff

grains, energies, softs, metals

WTI below $106

Brent below $118

[uls]

the bond market saw this coming

1 month

[Monseratto]

As foretold, no more liquidity to play with.

http://seekingalpha.com/article/2606...-related-funds

If QE2 Ends in April, Expect Unwinding From Large Positions in Commodity Related Funds
March 29, 2011

Now, there's also the third Wall Street camp that already knew that QE3 was a non starter, and QE2 would probably finish according to schedule, but wanted to front-run the selling by positioning themselves for the inevitable asset realignment by being in position in late April (after April options expiration for example).

Well, this group of investors would also be caught flat-footed and would have to speed up their timetable by getting into position immediately. This would means getting out of any commodity related positions ASAP, and then entering additional short positions, buying puts, and going long the U.S. dollar.

Biased Towards Commodities

Remember, there are a whole lot of crowded trades in areas all revolving around the QE2 monetary program that were initiated as far back as the Jackson Hole Speech. Therefore, an early end of QE2 would bring some considerable unwinding, disproportionately biased towards commodities, as the broader equity market would still have support from increasing corporate profitability, and relatively reasonable valuations, as compared to commodities.

Off Guard Mass Unwinding

In other words, expect significant selling in commodity related funds as a result of major players unwinding large positions – the selling could go on for months if QE2 ended abruptly. This is in large part why the Federal Reserve likes to send signals ahead of time, which Bullard appeared to be doing, to prepare market participants so the unwinding of positions is done in an orderly fashion.

One thing for sure is that nobody on Wall Street is currently positioned for an ending of QE2 in April. If the Federal Reserve through its various communication channels of member speeches, media conduits, and personal interviews starts in the next few weeks reinforcing this notion of QE2 ending ahead of schedule over the next couple of weeks, i.e., sending Wall Street the "get prepared" signal, one could expect a whole lot of market volatility as fund managers try to reposition themselves accordingly.

Blood in The Streets?

Since commodity prices tend to move in unison across the board, there could be some massive selling ahead - the proverbial "Blood in the Streets," at least for anything commodity related, where large and liquid commodity index linked funds, popular with institutional funds (pension, 401k, etc.) such as Goldman Sachs Commodity Index (GSCI), Fidelity Series Commodity Strategy (FCSSX), could see huge volatility with large liquidation.

For investors, if more hints from Fed officials regarding ending QE2 early start surfacing in the media, coupled with stronger jobs numbers, then take them as a collective indication that the time has come to cash in on some of the profits from commodity related investments.

Ironically, one of the Fed's objectives that QE2 has failed to deliver – to lower the U.S. long bond interest rate – would likley be achieved after Fed stopped the treasury buying program (QE2).

Although interest rate would still likely trend up in the long term, the short-term pop of the U.S. treasury brought on by the unexpected early end of QE2 would make Bill Gross regret not keeping some of the U.S. bond holdings in his Pimco Total Return Fund.

[uls]

BSP rate hike

http://www.abs-cbnnews.com/business/...st-rates-again

BSP hikes interest rates again

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) raised its policy rates for a second consecutive meeting on Thursday after consumer prices in April rose at their fastest pace in a year and raised the risk official inflation targets will be breached.

Speaking soon after raising rates, the central bank governor said the government's 2011 inflation target of 3% to 5% was at risk and this policy move was aimed at containing upward shifts in inflation expectations.