Morning Levels:/Merkel coalition weakens following resignation; EU short sale rules $EWG $SPY

· SP500 futures off 27 points to 1043 (pretty much lows of the morning).
· Europe – DJ Euro Stoxx -3.35%; Spain dwn 4.08%.
· European trading – led lower by banks; ING -7%, Agricole -6.6%, SocGen -6.2%,
Unicredit -6%, BBVA -5.7%, Santander -5.4%.
· FX – DXY is up 1.3% and setting new highs for this move; euro off although hasn’t yet taken
out the 5/18 lows of $1.2144 (trading off 1.4% to $1.2198). The pound is off 0.7% vs. the
dollar. The yen is up 2.3% against the euro and hitting fresh highs. AUD off 2.07% and
hitting fresh lows. S Korean won off >3% vs. the dollar.
· Asia: Spain dn 4.1%; Japan dn 3.1%; China dn 1.9%; Hong Kong dn 3.5%; India dn
2.7%; Australia dn 2.9%
· Gold is flattish this morning
· Copper off 3.4% to $304 this morning
· Crude off $2.30 to $68; lowst since Jul ’09
· Treasuries – big rally in TSYs - 2 yr yields crashing lower – approaching all time lows of
0.65% hit on 12/16/08; they are 0.68% this morning (vs. 0.73% on Mon and 0.76% on Fri).
10yr yields also lower – at 3.09% vs. 3.19% on Mon.
· 2-10 spreads falling further – off another 5bp to 242bp; lows since Oct ’09
· Corp Credit – IG is out 7 ¼ to 131 ¾-132 ¾
· Sov CDS – Greece out 34bp to 761; Ireland out 30bp to 254; Italy out 23bp to 189; Portugasl
out 32bp to 361; Spain out 32bp to 242.
· Quick Recap - Europe off >3%; Spain epicenter of morning's worries; nothing "new" or
specific, but same worries (sparked by weekend regional bank failure); IMF neg. Spain
comments; Germany/Merkel coalition weakens following resignation; EU short sale rules
being discussed – could be announcement before week end; new European bank rules due on
Wed – European countries may be forced to levy tax on their banks; JPMorgan is
downgrading a bunch of Greek banks ahead of a big week of earnings for the group; Korea
tensions up as NK preps for war.