May 31, 2011

May Goes Out Strong

May 31, 2011

Equity markets are strong this morning as the “risk on” trade picks up a bid on the last day of the month. EU leaders appear to be coming to agreement over a second rescue package for Greece in an effort to avoid a default by the troubled country. It appears that Germany has changed its tune slightly, softening on its demands that a second bailout include private sector assistance.

Global economic data continues to soften, which could be positive for equities as it helps policy makers justify keeping stimulative policies in place. Inflation in Euro-land came in less than expected, which is also helping global equities since it eases pressure on the ECB to raise rates. The Chicago Purchasing Manager’s Survey came in at 56.6 vs. expectations of 62.0 and last month’s 67.6. Consumer confidence for May came in at 62.0 vs. expectations of 60.5 and vs. April’s 65.4.

Oil has eased over the past month, and while national gasoline prices haven’t eased due to refining capacity constraints, prices at the Palo Alto station I showed last month have eased by $.24 to a mere $4.759 for regular and $4.999 for Supreme.

Moody’s is considering downgrading Japan’s sovereign debt. “The review has been prompted by heightened concern that faltering economic growth prospects and a weak policy response would make more challenging the government’s ability to fashion and achieve a credible deficit reduction target.”

Wheat prices are off 4% this morning after Russia announced it would lift its ban on wheat exports.

Japanese manufacturing grew by 1% in April vs. March, and indications are for a bigger rebound in June. Factory managers expect orders to rise by 8% in May and 7.7% in June.

The Organization for Economic Cooperation and Development is encouraging central banks to increase benchmark interest rates to contain inflation. "The rise in long-term inflationary expectations ... suggests that part of the recent rise in headline inflation may now be expected to persist for longer than previously thought," the OECD said.

U.S. Rep. Paul Ryan's proposal to privatize Medicare is almost certain to be dropped by the GOP, but that's no excuse for Democrats or Republicans to stop working to control the cost of health care for the elderly, according to The Economist. "Both parties have, somewhere inside them, a serious proposal to reform Medicare," the magazine noted. "If they thought they could be elected by offering such a plan, they would do so."

The King of the Sweater Vest, Jim Tressel, has left his second school in disgrace. Just over a decade after leaving Youngstown State because of NCAA violations, the Ohio State football coach resigned over the weekend in the midst of what appears to be at least 100 NCAA infractions.

I’ve heard rumor there is an NBA Final occurring, but can’t confirm that rumor.

Have a great day


May 25, 2011

Weak Durable Goods Orders

May 25, 2011

Equity futures are down this morning on the weakest durable goods order report since QE2 began. Durable goods for April fell by 3.6% vs. an expected decline of 2% and March’s 4.4% increase. Aircraft orders were weak as were autos, which was partially impacted by component shortages caused by the earthquake in Japan. Boeing said they received orders for two planes in April vs. 98 in March. Orders fell 1.5% ex-transportation equipment vs. expectations of a 0.5% decline.

California Pizza Kitchen agreed to be purchased by Golden Gate Capital for $18.50 per share, a 10% increase over yesterday’s close. The company had been shopping itself for about a year. Game maker Zynga is reportedly preparing to file an IPO by the end of the quarter. Zynga derives the bulk of its revenue from games designed for FaceBook, including the infamous FarmVille.

Chrysler repaid of $7.6 billion in loans from the US Treasury and Export Development Canada. Fiat may now increase its stake in the automaker.

The Administration has issued sanctions against Venezuelan state oil company PDVSA because it has sold gasoline to Iran. I’m not sure what the sanctions entail, but they don’t create any limitations on the ability of PDVSA owned CITGO to operate in the US. The hypocrisy from this President never ceases to amaze me.

Amazingly, after all the issues in the banking sector over the past decade, the first fraud investigations in the mortgage securitization process have been announced. The AGs from FL, NY and CA are focusing on Goldman, Bank of America, Morgan Stanley, JP Morgan, UBS and Deutsche Bank. CA is the only state who has added Origination Fraud into their investigation, reportedly exploring the concept of Systematic Origination Fraud.

APAC markets were weak again last night on concerns about the Chinese economy. New data show the country is facing higher than expected inflation and an underlying economic slowdown. The ASX suffered the biggest loss, down 0.7%, while the Kuala Lumpur Composite was an outlier, rising 0.2%.

State and local government 2012 budgets anticipate cutbacks of 450K jobs. Fiscal year 2012 begins July 1.

At least 13 tornados hit the Midwest yesterday, causing billions in damage and at least a dozen deaths. This has been the 9th most deadly tornado season in the US since 1953, but the season is only half over. Nearly 500 people have been killed by storms this year. A spokesman for the National Center for Atmospheric Research said there is evidence supporting a rise in tornado activity in years like 2011, in which a La Nina condition begins to fade.

Congratulations to the USC Trojans and coach Peter Smith for capturing their third consecutive NCAA Men’s Tennis title.

Have a great day


May 23, 2011

Weak Manufacturing Data from China

May 23, 2011

Equity futures are down almost 1% this morning after a very weak close in the last hour of trading on Friday. The big concern this morning is coming from Europe the IMF announces plans to stabilize Portugal with a 26 billion Euro loan. Additionally, concerns abound about the stability of both Italy and Spain as bond yields for both countries jumped. The Euro is weak this morning, hitting a record low versus the Swiss franc.

Commodities are extremely weak this morning on concerns global growth is slowing as a result of a weaker than expected manufacturing number out of China. Copper is down almost 4% this morning and oil is down 3%. The dollar and Yen are both up. Bonds in Germany are up as the rate on the bund fell 5bps to 3.01%.

A tornado ripped through Joplin, MO yesterday, killing 89 and leaving a massive wake of devastation. The tornado was ¾ of a mile wide, and debris has been found up to 60 miles away.

APAC markets were down hard last night as Chinese stocks slid 2.9% on concerns about slowing manufacturing growth. The Nikkei fell 1.5%, ASX 1.9%, Kospi 2.6%, Taiex 1%, Hang Seng 2.1%, and SET 1.8%.

RealtyTrac reported that US lenders now own 872K foreclosed homes, double the level of three years ago. The NY Times reported that prices are still falling as the spring selling season begins. On the positive side, foreclosure filings last month were 219K, a 34% decline from the prior year.

The city of Duluth, MN, sued online travel agency Expedia for sales tax revenues that Expedia doesn’t feel obliged to pay the city. While the city may win the suit, they could lose the war as Expedia has reportedly “blacklisted” cities attempting to collect the taxes by lowering destinations in those cities in search results on the Expedia site.

Negotiations in the Middle East have taken a turn, although at this point it’s difficult to say which whether the turn will be for the better or worse. President Obama has suggested beginning the negotiations between the Palestinians and Israel by resetting to the pre-1967 borders. Israel has said this is a non-starter. Remember that the borders were reset after Israel won the Six-Day War in 1967 and took over the Gaza Strip, Sinai Peninsula, West bank, East Jerusalem, and the Golan Heights.

As far as I can tell the world didn’t end on Saturday as expected by a number of, well, let’s just say interesting forecasters.

In a case of “are you kidding me”, the Washington Post reported that the Justice Department and SEC both routinely allow companies suspected of paying overseas bribes to conduct their own investigation. The companies are then required to share their findings with the government. Really?

Have a great day


May 20, 2011

LinkedIn-Party Like its 1999

May 20, 2011

Equity markets have opened weak today as the Euro and Greek bonds are back in the news, with both weak today. Greek 10 year bond yields soared 1.11% to 16.6% after Fitch cut Greece’s credit rating to four levels below investment grade. EU policy makers have been discussing a soft restructuring of the bonds, tantamount to a default. The Euro is also under pressure over concerns Greece’s problems may extend across the continent, and even drag down some of the more stable economies.

Investors in LinkedIn partied like it was 1999 yesterday as the stock rose almost 100% on its IPO. The company now boasts a $10 billion (+) market cap, levered off of $15 million in net income and $250 million in revenues over the preceding 12 months.

Barnes & Noble, which put itself up for sale last summer, has received a bid from Liberty Media for roughly $1 billion, a 20% increase from yesterday’s closing price.

The International Energy Agency warned that rising oil prices could “derail the economic recovery.” Here in the US gasoline prices have eased by $.10 this week as concerns about refinery damage from Mississippi flood waters have eased.

ECRI is saying that their long leading indicators are pointing to a peak in global industrial growth in mid-summer. According to ECRI, this downturn is being confirmed by commodity prices, ISM, and other short term leading indicators. They are discounting a second recession, saying it isn’t likely.

Have a great weekend


“Happiness is not a station you arrive at, but a manner of traveling.” Margaret Lee Runbek

May 18, 2011

Quiet Morning

May 18, 2011

Equity markets are set to open flat this morning as earnings season winds down and the macro news flow slows to a trickle. The big upcoming event (or non-event) is the end of QE2, scheduled to end June 30. The US hit their debt-ceiling limit earlier in the week, although by using some accounting gimmicks the Treasury can continue to operate for 2-3 more months. Polls still show that 90% of Americans are against raising the debt ceiling.

Wheat is up this morning on concerns that a drought in Europe threatens crops there. Oil prices are also up this morning as over 100 wildfires in Alberta, Canada are threatening to shutter almost 100K barrels of production per day.

According to the Washington Post, manufacturing jobs are returning to the US as a result of the weaker dollar. Unfortunately, the pay at most jobs is lower than that found in the prior cycle. Would this be considered a Pyrrhic victory?

Commodities Now is reporting that China’s imports of major commodities has begun to wane, which could add continued pressure to already weak commodity markets. The chart below shows the CRB over the past year.

Federal Reserve Bank of St. Louis President James Bullard said that the end of QE2 represents the “high tide of easy monetary policy.” He expects the Fed to begin reducing the size of its balance sheet, effectively tightening money supply, before the end of the year. Bullard was the first Fed member to support QE2, and is generally regarded as an inflation dove.

Oaktree Capital announced plans to list on the NYSE, becoming the latest in a long line of money management, investment banking and private equity firms to tap the public markets for capital. In general the investments have proven to benefit the sellers much more than the buyers.

Target beat estimates last night on better than expected private label credit card activity as well as strong grocery sales. Dell also beat on better input costs, in contrast to the results of Hewlett Packard a day ago. Both cited weak consumer demand.

New York Attorney General Eric Schneiderman opened what appears to be a broad investigation into major banks' role in the financial crisis. In recent weeks, he has made formal requests to Bank of America, Goldman Sachs Group and Morgan Stanley seeking documents and information relating to loan pooling and home-mortgage securitization.

State legislatures and governors are moving to reduce the length of time that jobless residents can receive benefits. Right now more than 8 million people in the U.S. collect unemployment benefits. State officials are worried they may be forced to raise taxes on employers to continue paying benefits.

The saga of the Governator continues as revelations about his love child with the family’s long time housekeeper begin to emerge.

EMEA markets are up across the board this afternoon, Asian markets were generally positive last night on strength from bank and tech stocks.

Have a great day


May 16, 2011

IMF Indescretions

May 16, 2011

Issues at the IMF and a weaker than expected Empire Manufacturing have equity markets opening soft this morning. The overriding concern continues to be what happens when QE2 expires in the next few weeks. Market participants appear to be lowering their risk profiles in anticipation of QE2 ending, even though the effects of the Fed’s action will remain in place as they have indicated a desire to sustain the size of their balance sheet, effectively leaving stimulus in place, albeit at a slightly lower level. Earnings reports are almost complete for the quarter as 435 constituents in the S&P 500 have reported, with 313 surprising to the upside and 114 missing EPS, slightly less than the 360/136 ratio of last quarter.

The issues I mentioned at the IMF are of your basic public official variety, where the head of the IMF, Dominique Strauss-Kahn, has been charged with attempted rape and a criminal sex act on a New York hotel maid. John Lipsky, the #2 leader in the IMF, has been tapped to lead the organization while DSK deals with the legal fallout of his alleged actions.

Flooding along the Mississippi is now at levels not seen since 1973. The river is up to 50 feet above normal in spots, and officials have begun opening flood gates to relieve pressure on the river before flood waters hit Baton Rouge or New Orleans. Scores of farms and refineries are either under water or will be soon. New Orleans is the largest port by volume in the Western Hemisphere, and a shutdown could exacerbate ongoing economic weakness.

The US government issued its annual report on Friday, and one conclusion was that Medicare would run out of money five years earlier than last year’s estimate, now 2024 vs. 2029. Social Security will run out in 2036, one year earlier than previously estimated.

Oil officials are doubting the viability of plans to increase Iraqi oil production from 2.6 million to 12 million barrels per day by 2017.

India’s wholesale price index rose to 8.7% last month, which could be a precursor for additional tightening of the country’s monetary policy.

NASDAQ and ICE dropped their $11.3 billion bid for NYSE Euronext, leaving Deutsche Boerse as the likely acquirer of the exchange.

The Treasury Department reported that China had trimmed its holdings of US government securities in March, possibly indicating reduced confidence in US markets and economic policy. Japan increased its holding slightly while Hong Kong decreased its holdings.

APAC shares were weak last night as concerns about Europe’s debt situation moved back into center stage.

If the NBA held a championship series with the Lakers or Celtics, would anyone care? We’re about to find out.

Have a great day


May 13, 2011

Oil, The Dollar, and Weak Economic Data

May 12, 2011

Please note that this was originally posted May 12, but due to technical issues with Blogger I have reposted it on May 13, 2011.

Today is macro Thursday, with a slew of economic reports coming out. In aggregate the reports were in line to slightly worse than expected. Equity futures are down this morning after a rough market yesterday culminated in a 1.5% selloff. APAC markets were hit hard last night after the big selloff in the US, and EMEA markets are following suit today. Commodities are also off again today as the markets continue their defensive rotation.

Initial jobless claims were slightly higher than expected, still well above 400K at 434K. The producer price index spiked up on higher fuel costs, rising by 6.8% vs. expectations of 6.5%. Advance retail sales were slightly less than expectations at 0.5% vs. 0.6%, but ex-auto and gas rose only 0.2% vs. expectations of 0.5%. CPI and the Michigan Consumer Sentiment indicator will both be released tomorrow.

Oil has pulled back over the past two weeks, from a peak of almost $114 (WTI) on April 29 to $97.50 today. Unfortunately consumers still aren’t seeing much relief at the pump as gasoline prices have spiked in recent weeks (until yesterday) over flooding concerns along the Mississippi. Flood waters are threatening major refining facilities, keeping upward pressure on the price of US gasoline. The gasoline pressure should be temporary, and if the oil pullback holds, we should begin to see some relief at the pump. Yesterday gasoline futures plummeted almost 8% after a government report showed that Americans have cut back on their driving and demand fell by 2.4%.

I have looked at various historical market patterns to get an idea of what market environment our present situation best represents. I am biased towards the ‘70’s as an economic and market analogy for today’ environment, however, Ron Geiss at posted the chart below comparing our present situation to that of 1907-1911. The market action has been similar to date, let’s hope that the future doesn’t mirror the past.

The IMF issued its semiannual report, and one quote was quite disturbing. “Strong policy responses have successfully contained the sovereign debt and financial sector troubles in the euro area periphery so far, but contagion to the core euro area, and then onward to emerging Europe, remains an tangible downside risk.”

The dollar has been week all year, and really weak going back to the middle of 2010. As the chart below (courtesy shows, the dollar’s recent rally has put it up against a falling channel, a very powerful technical pattern utilized by currency traders. How the dollar acts as it bumps up against this resistance will more than likely determine how the equity, commodity, and bond markets act over the second half of 2011.

News from Japan has been rather muted as the cleanup begins and companies attempt to get back to full operation. Yesterday TEPCO reported that the fuel rods at its #1 reactor are fully exposed, and the company isn’t sure how long they have been uncovered but indications are that they have been uncovered since the crisis hit. In this state the rods are probably in full reaction as officials reported that melted fuel has dropped to the bottom of the pressure vessel. They are hoping to shut down the #1, #2 and #3 reactors by October.

Raj Rajaratnam was found guilty on 14 counts of securities fraud and conspiracy charges in an insider trading case. Raj faces up to 20 years in prison when he is sentenced. Shameless greed like that of Raj and his conspirators give our business a bad name, and I’m glad to see he was duly prosecuted, even though the whole situation is unfortunate.

Have a great day


May 10, 2011

Microsoft Buys Skype

May 10, 2011

Equity Markets are opening with a slight bid this morning. On the economic front import prices rose 2.2% vs. expectations of 1.8% on higher food and energy prices. The year over year increase was 11.1% vs. expectations of 10.4%. Inventories rose by the most since December, rising 1.1% vs. expectations of 1.0%. Treasury bonds are slightly down this morning, with the yield on the 10-year rising to 3.17%, down from its February high of 3.70%. Commodities are slightly down with oil down 1.5%. On the upside NYMEX gas is up over 1% and sugar up over 4%,

This is the last major week of earnings releases as 423 of 500 stocks in the S&P 500 have reported so far. To date 72% of companies have exceeded earnings and 67% have exceeded revenue estimates, both in line with the prior quarter. The average surprise for earnings has been 7%, and 1% for sales, which compares to 6% and 2% last quarter.

S&P downgraded Greece’s credit rating last night on concerns the country may be forced to restructure its debt. Greek bonds sold off hard on the news.

China's reported a strong jump in the trade surplus yesterday to $11.4 billion in April, much higher than expectations. Exports grew 30% year over year while imports grew 22%. The yuan hit an all time high yesterday.

Microsoft announced they would be buying Skype for $8.5 billion in the biggest tech deal of the year. Big Softy plans to eventually integrate internet calling into Outlook, Xbox, Windows mobile phones, and corporate phone software.

PIMCO’s holdings of government debt fell to -4%, showing they had increased their short positions. Bill Gross has been vociferous in his disapproval of the Fed’s strategy as it relates to the dollar and treasury bonds.

In a blow to regulation, FDIC Chairman Sheila Bair said she will leave when her term expires in July. Ms. Bair was very early in warning about the dangers of deteriorating credit quality in US bank portfolios. Unfortunately her warnings were ignored by Hank Paulson and Alan Greenspan.

Bloomberg is reporting that the highest earning California based city employees earned almost $10 million, or an average of $490K each. Robert Rizzo, the indicted former City Manager of Bell earned $1.2 million.

Federal regulators are considering creating new, “super-safe” mortgage loans known as qualified residential mortgages, or QRM’s, which would require a 20% down payment (I’m old enough to remember when that was the standard down payment). The Mortgage Bankers Association is estimating that rates will rise by 3%, to over 8%, for non-QRM loans. Additionally, the regulators are looking at shrinking the role of both Freddie and Fannie, pushing the secondary mortgage market increasingly to private investors.

APAC markets were mostly positive last night although volumes were low. The markets are cautious in advance of China’s inflation report coming out tonight (Wed. AM). EMEA markets are strong this morning, mostly up over 1%.

Have a great day


May 6, 2011

Better Employment Numbers

May 6, 2011

Happy Friday!

“The hardest thing in the world to understand is the income tax.”-Albert Einstein

Equity markets are getting a strong bid this morning after a much better than expected increase in nonfarm payrolls, which rose by 244k vs. expectations of 185k. Private payrolls were the driver, rising by 268K, while government payrolls declined again by 24K. Companies such as Norfolk Southern and McDonald’s (which hired 50K new employees last month) contributed to the rise. The unemployment rate rose during the month from 8.8% to 9.0% as more job seekers reentered the market. The household survey showed a decline in employment by 190K as the share of the population in the labor force fell to 58.4% from 58.5% last month.

Commodities took a nasty correction yesterday after Jean Claude Trichet commented that they would be leaving rates unchanged this week after raising them last month. The decision caught the markets off-guard, leading to a significant decline in the Euro and commodities and a surge in the dollar from its lowest level ever. Oil fell by over $12 (see chart below). There has been concern for a number of weeks that commodity prices, especially oil and silver, had moved well past their fundamentals.

Speaking of the dollar, it has now lost 50% of its value since 1985. Typically a weaker currency helps exports, yet America still runs the world’s largest trade deficit. “And America’s creditors are having to cope with the unappealing combination of holding low-yielding Treasury bonds in a depreciating currency” said Forbes magazine.

Sounding a lot like his anti-regulation predecessor, Ben Bernanke commented on the implementation of Dodd-Frank by saying “No one’s interests are served by the imposition of ineffective or burdensome rules that lead to excessive increases in costs or unnecessary restrictions in the supply of credit. Regulators must aim to avoid stifling reasonable risk-taking and innovation in financial markets, as these factors play an important role in fostering broader productivity gains, economic growth, and job creation.”

Reuters reported that Goldman Sachs is aggressively lobbying against implantation of the Volcker Rule, which restricts proprietary trading. The company is reportedly meeting with members of Congress, regulators, and the White House, all occurring during a time when their Chairman is being investigated for perjury related to his testimony in front of a Senate investigatory committee.

I don’t know how President Obama’s presidency will be viewed by future historians, but in my view there are two important accomplishments to date. The first is obviously finally finding and terminating Public Enemy #1. The second, a bit more obscure, is the Justice Department’s inquiry into the BCS and college football’s bizarre way of determining a champion. If Justice is successful in forcing the NCAA to adopt a playoff format, one of the great injustices in sports will finally be rectified.

The Wall Street Journal is reporting that the cost advantage of outsourcing to emerging economies is waning. While modest to date, American companies may begin moving more jobs back to domestic markets as rapid wage increases in China and currency movements (see dollar comments above) make it more economical to produce domestically. This would be a welcome outgrowth of 25 years of a declining dollar.

APAC markets were weak last night in reaction to the weak commodity markets. The Nikkei and Kospi both fell 1.5%, ASX 0.2%, Hang Seng 0.4%, and Shanghai 0.3%.

The Lakers are in Dallas this weekend, hoping to avoid an end to their season.

Have a great weekend and Happy Mother’s Day.


May 4, 2011

Pop Goes Silver!

May 4, 2011

Equity markets have opened weaker this morning after yesterday’s moderate sell-off. The ISM non-manufacturing composite came in at 52.8 vs. expectations of 57.5 and March’s 57.3. The market has been signaling a defensive rotation as healthcare, telcos, consumer staples, and utilities have led the market while energy and industrial stocks have been weak. Combined with the weaker 10-year yield, the defensive rotation suggest that the odds of a mid-cycle slowdown or recession have increased.

According to the Energy Information Administration gasoline will cost the average consumer $1200 more in 2011 than it did in 2009. The current national average of $3.97 is 48% higher than it was in September. Some relief may be in sight as gasoline for September delivery closed yesterday 4% below the June contract. A number of seasonal refinery shutdowns are expected to also come back online over the next few months.

That popping sound you heard may have been the bubble in silver. The chart below shows the 20% correction in silver over the past week after the giant run-up since December. Hedge funds such as Soros Fund Management and Passport Capital have reportedly been dumping silver since volumes exploded over the past few weeks. The silver ETF (SLV), typically a thinly traded security, has been trading higher volumes than the S&P Spider (SPY) over the past few weeks. Typically the volume on the SPY is 8x that of the SLV.

Portugal agreed to a $116 billion rescue package from the IMF and EU. Prime Minister Socrates is awaiting a response from the nation’s opposition parties.

A US Senate report accusing Goldman Sachs of deceiving clients has been referred to both the DOJ and the SEC. Speculation is that Lloyd Blankfein may be charged with perjury in his Senate testimony last year.

The Woodrow Wilson Center for International Scholars issued a report concluding that the US could miss out on a huge infusion of Chinese capital due to political obstacles created by the US. The report cited a potential global investment by China of $2 trillion over the next few years.

APAC markets were weak last night as commodity prices continued to decline and China discussed potential further tightening. The ASX, Kospi, and Shangahi each lost 1%, Hang Seng 1.3%, Taiex 0.2%, Singapore Straits 1.2%, and Sensex 0.4%.

A paper from the IMF says that the US was able to rapidly pay down its huge WWII debt through a combination of economic growth and tight financial controls. The tight financial controls were abandoned around 1980, according to the report.

Treasury Secretary Geithner has concluded that the US can continue making payments on debt and other expenditures until August without raising the debt ceiling. Tax receipts are running better than expected and the Treasury is controlling the timing of certain non-critical payments. The prior deadline was early July.

According to the Economist (again), household formation in the US will rise as the job market recovers. Rising household formation will help stimulate the housing market. In 2010 375K households formed, the lowest number ever and well below the prior 10-year average of 1.3 million.

The Pension Benefit Guaranty Corp (PBGC) has a $23 billion deficit, and is looking to increase its take from employers by $16 billion over the next decade to help make up the shortfall. The agency is under major financial stress after taking on the pensions of the auto industry.

European markets are weak across the board.

Have a great morning.


May 2, 2011

Bin Laden Dead!

May 2, 2011

The biggest news on the global stage is that American Special Forces attacked a compound inside Pakistan and in a 40 minute fire fight killed al-Qaeda leader Osama Bin Laden.

Equity futures are up this morning, the dollar is stronger after declining for nine days, and oil fell the most in the past two weeks, although it still sits at $113 for the WTI. Brent crude hit a 7-week low. Silver also fell after the CME raised the amount of cash required for speculative positions. Airline stocks are getting a bump this morning due to a perception their operating environment will now be safer.

The ISM Manufacturing index for April declined from March to 60.4 from 61.2, but was ahead of the 59.5 consensus. Since this is a diffusion index, anything over 50 indicates expansion. The ISM prices paid rose to 85.5 vs. expectations of 83.9, indicating higher input costs. Construction spending rose 1.4$ vs. expectations of a 0.4% increase.

M&A activity continues as biopharmaceutical leader Cephalon is up 6% after receiving a takeover offer from Teva Pharmaceuticals for $6.8 billion. International Coal Group is up 30% after receiving a $3.4 billion offer from Arch Coal.

Manufacturing activity in China has begun to slow. The Federation of Logistics and Purchasing said its PMI fell to 52.9 in April from 53.4 in March. The yuan rose for the 7th consecutive week, hitting an 18 year high last week while the dollar hit a three year low vs. a basket of currencies.

A Gallup poll shows that despite the official data, an overwhelming majority of Americans believe the country is still in trouble. A surprising 29% said the US is in a depression, 27% said recession, and 16% said it is slowing down.

According to the NY Times, the Japanese Ministry of Finance surveyed 70 damaged factories and learned that nearly 2/3 are recovered enough to be back in operation by this summer. This is much faster than many experts have anticipated.

The Economist was critical of both Republican and Democratic posturing regarding gas prices. “Your taxis and town cars and commutes are not going to be made any cheaper, at least in the near term, by ending oil company subsidies or drilling in the Arctic National Wildlife Refuge. The real goal of these types of policies is to reassure voters that your party is trying to do something about gas prices and the other party is responsible for the problem.”

Speaking of gasoline, last week I included a picture of the price board at a Shell station in Palo Alto (thanks Al). The picture below is of the same price board, showing a $.04 increase over the week, 0.8%, or roughly 40% per annum. Good thing rising prices are just transitory.

In what is already shaping up to be an almost comical Presidential election for 2012, Donald Trump has announced that “in his mind” he is planning to run for President. I’m not sure if that means he will be running in his mind, or if he is just thinking about running. My first thought is he’s completely unqualified, but given his four bankruptcy filings it is possible he could have the ideal skill set needed to run a country careening through a debt laden morass.

Trading in EMEA and APAC markets was light as the UK, China, Hong Kong, Malaysia, Taiwan, Vietnam, and Singapore markets were all closed for a holiday. The Nikkei rose 1.6%, ASX flat, and Kospi up 1.7%.

Have a great day