Greetings,

We begin with several updates on commodities.

1. Soybean meal futures continue to rocket higher. While China's rising demand for feed is one of the factors, at this point hot money is all over this market. 

Source: @barchart

2. The situation is similar with US sugar and soy futures, where the rally has accelerated.

 

Source: Investing.com

3. US lean hogs futures jump as pork prices in China reach record highs this week. This market is contributing to the soy meal rally. 

Source: @barchart

4. Zinc rally resumes on lower production. See an overview from the FT.

 

Source: @FT

5. Coal prices in Asia are waking up.

Source: @barchart

6. While some of these rallies look impressive, the CRB broad commodity index recovery will take a while.

7. Precious metals are under pressure ahead of the Fed's rate hike. Here is platinum spot.

Source: @barchart

8. The US gasoline market is well supplied, as inventories remain way above the typical levels for this time of the year.

Source: Tradingeconomics.com, @MarkitEconomics

9. We continue to see a disconnect between crude oil and the trade-weighted US dollar index.

Source: ‏@enlundm

Next, we have a few updates on the Eurozone.

1. The Eurozone continues to be haunted by the deflation ghosts. The PPI year-over-year decline was the greatest since the Great Recession. This is likely to keep downward pressure on the CPI.

2. The Eurozone's small and medium size businesses no longer have problems accessing credit. Weak demand seems to be more of an issue.

Source: Goldman Sachs

Italian banks are particularly eager to lend.

Source: Goldman Sachs

4. Investment-grade euro-denominated issuance remains highly elevated as the ECB is about to begin corporate bond purchases. Also, the ECB decided it won't automatically dump corporate bonds that are downgraded to junk. 

Apparently some firms will use the proceeds of this debt sale to the ECB to buy back stock. This program, therefore, should be a positive for the European equity markets.

Source: @Schuldensuehner, @welt

1. In the UK, construction activity is stalling.

Source: Tradingeconomics.com

2. Below is a demographic breakdown of "remain" and "leave" supporters expected to vote in the EU Referendum.

Source:  ‏@FT

1. Switching to Japan, the enthusiasm for the BoJ's quantitative easing boosting inflation is fading. Inflation expectations remain significantly below the 2% target.

Source: Goldman Sachs

2. Related to the above, Japan's corporate goods prices come under further pressure.

Source: Goldman Sachs

3. The situation is not helped by the recent yen rally (chart below shows the dollar falling against the yen). If this trend continues, deflation could become entrenched again.

Source: @barchart

1. In emerging markets, we see quite a rally in Indian shares. Some suggest there is room for further appreciation.

2. Now that Argentina issued new dollar-denominated debt, sovereign CDS on that country is trading again. The spread is only modestly higher than it is for Brazil.

Source: ‏@MktOutperform

3. Here we have a couple of interesting data points on Israel (from the Economist).

Source:  ‏@JmBadalamenti, @EconBizFin

Now let's look at some global trends.

1. Yesterday we discussed the manufacturing PMI reports for several countries. Here is the full comparison of those results.

Source: Bloomberg.com, ‏@JmBadalamenti

2. The velocity of money is declining for all major developed economies.

Source:  ‏@bySamRo, RBC

3. This next chart shows US exports to China and Japan over time.

Source: ‏@bySamRo, RBC

4. Negative-yielding paper outstanding is now above $10 trillion.

Source: ‏@FitchRatings

1. Back in the United States, the treasury curve continues to flatten ahead of the rate hike(s).

Source: @SoberLook

2. It seems that a June hike is now less likely as the market focuses on July. Some of the latest statements from the Fed officials suggest that they are not in a hurry.

Source:  ‏@GregDaco, @OxfordEconomics

3. One of the wild cards remains the yuan - which is likely to continue depreciating. That could spook the markets and the Fed, potentially delaying the hike further.  Perhaps. Here is the Fed-PBoC monetary policy loop.

Source: Goldman Sachs

4. The New York ISM business conditions index surprised to the downside. This indicator will be important to watch going forward for further signs of deterioration.

Source: ‏ ‏@ReutersJamie

5. In US labor markets, the Gallup poll suggests continuing improvement, potentially a positive for today's jobs report. However, the recent Verizon strike could create quite a bit of noise in the payrolls figure.

Source: @GallupNews

6. By the way, the ADP data shows US employment growth is once again driven by small business.

Source: @ADP

Finally, we have a few market observations.

1. Term premium in treasuries is declining again. According to some, the use of longer-dated treasuries as a portfolio protection tool negates term premium.

2. Leveraged loans are almost back to flat over the past year.

Source: Ycharts.com

3. It looks as though many retail investors got out of the stock market at the lows and missed the rally - again. The chart below shows retail money market funds holdings (many are at brokerage accounts).

4. Lenovo shares show the squeeze on the global PC market.

5. In the muni market, the situation for Puerto Rico looks dire, with massive liabilities due in July.

Source: @business

Turning to Food for Thought, we have 5 items this morning:

1. According to the Kaiser Foundation, "Prince was among a growing number of Americans to die from a prescription painkiller overdose".

Source:  ‏@KaiserFamFound

2. US new homes continue to get larger (and more expensive). This is pricing many people out of the market.

Source: ‏@NickTimiraos 

3. The US fertility rate is near record lows.

Source: ‏@JoshZumbrun

4. Teen births have plummeted in the US.

Source: ‏‏@voxdotcom 

5. Why do top elective offices have so few women? Here are the Pew survey results.

Source:  ‏@james_e_bell

Have a great weekend!