Good morning,

Markets are called lower this morning. This is what's happening in the markets today:

  • The Fed carries out operation twist and comments that rates will remain close to 0% till 2015;
  • Spain to auction bonds maturing in 2014, 2015 and 2016;
  • Spain could formalise aid request for banks this evening;
  • Greeks formed coalition government;
  • China's PMI mau shrink for an eight month in June. The preliminary reading was 48.1 for a purchasing managers' index today from HSBC Holdings plc and Markit Economics;
  • 10-year Italian debt is yielding 5.916%, 10-year Spanish debt is yielding 7.042% and 10-year Portguese debt is yielding 10.430%;
  • Brent is trading at $92.16/barrel;
  • Facebook Inc.’s 22% rally in two weeks has helped the social-network operator avoid posting the biggest slump among the largest U.S. initial public
  • offerings since the start of 2011;
  • EU leaders summit on 28-29 June.

We have a coalition government in Greece though the markets are called lower this morning. The markets are lower for two main reason. The first being that Operation Twist carried out by the Fed was not as large as expected and secondly Spain will be raising longer dated paper today. The rate at which Spain manages to raise debt will set the tone for the rest of the trading day. The 10-year yield on Spanish debt is now above the 7% level.

Still alot of uncertainty in Europe so for the time being I remain of the view that investors should be invested in US blue chips and stay out of Europe for the time being until we get further clarity of the market direction in Europe. Markets are now waiting for the EU leaders summit at the end of the month to see what the leaders have planned to solve the problems in Europe.


Spanish 10-year yields yesterday declined for a second day to 6.74%. The rates on June 18 reached 7.29%, the most in the euro era and above the 7% level that pushed Greece, Ireland and Portugal to seek rescue packages.

European finance ministers are set to meet in Luxembourg today to discuss the currency union’s financial woes. Meanwhile, economic data may show the crisis is weighing on company output and household sentiment.

Spain is scheduled to auction notes today maturing 2014, 2015 and 2017. Earlier this week, in its first debt sale since becoming the fourth euro member to seek a bailout, Spain auctioned 12-month bills at an average yield of 5.074%, a record high in Bloomberg data going back to 2004.


China’s manufacturing may shrink for an eighth month in June, matching the streak during the global financial crisis in a signal the government’s stimulus has yet to reverse the economy’s slowdown.

The preliminary reading was 48.1 for a purchasing managers’ index today from HSBC Holdings Plc and Markit Economics. Above-50 readings indicate expansion. The lowest crisis level was 40.9 in November 2008, when industrial output grew 5.4% from a year earlier, compared with 9.6% last month.


Greek Prime Minister Antonis Samaras is set to announce the members of his government today after securing agreement from the country’s political leaders on a coalition that will seek relief from austerity measures tied to international loans.


Chairman Ben S. Bernanke is signaling the Federal Reserve will probably add to its record stimulus should the economy fail to make sufficient progress in creating jobs for 12.7 million unemployed Americans.

The policy-setting Federal Open Market Committee yesterday extended its Operation Twist program and will swap $267 billion in short-term securities with longer-term debt through the end of 2012. Fed officials also downgraded their forecasts for growth and employment while noting “significant downside risks” to the economy.

Stock to watch: Caterpillar

Caterpillar said yesterday that coal markets are slowing in U.S., China and Australia; overall mining strong though unlikely to keep past 2-yr growth.

  • Major mining players continue to invest, though some miners slowing greenfield projects
  • Hot spots include West China, Mongolia, Indonesia, West Africa, Mozambique
  • Increasing investments in R&D for mining
  • Reiterates 2012 forecast from April 25

CAT was down as much as 2.6% yesterday; reiterated 2012 forecast earlier, OTR Global said 2Q new equipment orders down 4%-7% (vs 1Q up 7%-12%), the first qtr with Y/y decline since 4Q 2009.

For more information on Caterpillar or other stocks we follow, contact our offices on 25688688.

Good day and happy trading!

Kristian Camenzuli