Let's begin with the UK where a higher risk of Brexit is now being priced into the markets. Once again, the Brussels attack made a "yes" vote on Brexit more probable.  

1. The euro-sterling exchange rose to the highest level in over a year (pound fell vs. the euro).

2. The British pound 3-month implied volatility jumped to a 6-year high - above the Scottish independence referendum (2014). 

Source: @valuewalk 

3. Sterling risk reversals fell sharply (this shows increased preference for GBP puts vs. calls).

Source: ‏@ReutersJamie,  X-axis: Q1-2007 - Q3-2016 (Reuters really needs to do something about their axis labeling).

4. We even see an increase in the UK sovereign CDS spreads. The default probability is of course tiny, but it shows that market participants are becoming more concerned.

Source: @Schuldensuehner, X-axis: Oct 2014 - April 2016

5. Here are the UK sectors that look vulnerable to Brexit, which will result in EU tariffs on UK products. 

Source: @OxfordEconomics 

Next, we look at some developments in the Eurozone.

1. Is the euro too expensive given the US - Eurozone rate differential? The real rate (inflation adjusted) differential, however, is not nearly as great.

Source: @MorganStanley

2. We now see negative corporate bond yields for some shorter-maturity bonds. Amazing. Thanks Mario! 

Source: @markets

3. Prime real-estate yields are expected to decline as well, following corporate yields lower (property values will rise).

Source:  ‏@CapEconProperty

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Separately, Spain's PPI hit another post-2009 low as deflation risks remain.

Switching to Japan, we see domestic investors buying foreign bonds to escape negative rates. At the same time, foreigners are selling Japanese shares. Neither seems to push the yen materially lower.

Source: JPMorgan

Separately, Mitsui, a huge Japanese firm with a significant focus on materials/commodities, saw its first loss in 70 years on writedowns. Shares gave up 8% immediately.   

Source: @JavierBlas2

Source: Google

Now on to China where we have a couple of observations.

1. China's corporations struggle with higher debt and falling return on equity.

Source:  @PeterLBrandt, @business

2. Foreigners' holdings of China's corporate debt had a third consecutive decline. So far the RMB globalization isn't working so well.

Source: ‏ Nomura

3. The yuan continues to decline in terms of China Foreign Exchange Trade System (CFETS) currency basket. 

Source: ‏ Nomura

Here are some trends in other emerging economies.

1. Brazil's unemployment rate continues to rise. This, combined with a relatively high inflation rate, is likely to fuel more social unrest.

The real fell sharply (chart shows dollar rising against the real) as a result of the central bank's reverse-swap sale. This is strange. Why is BCB trying to weaken the real? 

Source: barchart

2. South Africa's inflation rises as the rand weakness takes its toll. More rate hikes on the way?

3. Russia is struggling to issue some hard-currency denominated sovereign bonds but investment banks that would normally place such paper are not taking the business because of the sanctions.

Source: @WSJ, @Schuldensuehner 

The Canadian dollar took a hit in response to weaker energy prices. Canadian sovereign bonds also saw some volatility due to the new budget release - which will result in Canada's government running a deficit.

Source: barchart

According to Bloomberg, buyers from China represented a third of Vancouver’s housing market in 2015. This is in part why the housing market has been relatively stable in spite of the implosion in the energy markets.

Source:‏ @vexmark, @business

Back in the United States we have a few observations.

1. The Richmond Fed Manufacturing index shows a surprising pickup in activity in the region. This is an important development and could indicate a thaw in the US manufacturing recession.

Source: @bespokeinvest 

2. US new home sales declined on a year-over-year basis. Part of the reason is low inventories of affordable homes.

US developers hold tight housing inventory levels in order to maintain high turnover. They don't want a repeat of 2007.

3. US auto loan delinquncies continue to rise.

Source: ‏@TenYearNote 

Now we have some updates on the energy markets.

1. US crude oil production continues to decline, albeit quite gradually. The second chart below zooms in on this year, comparing production to the previous year.

2. US crude oil inventories reached another post-1939 record. The second chart shows crude in storage in terms of days of supply.

3. Crude oil imports remain elevated.

4. As a result of higher inventory build (as well as some profit-taking and hedging activity) NYMEX crude gave up 4% on the day, moving below $40/bbl again.

Source: barchart

5. Risk assets remain highly correlated to crude oil.

Source: ‏@vexmark, Goldman Sachs

6. We've been asked if the recent run-up in gasoline futures (shown yesterday) is a seasonal effect. It's not. The May gasoline futures contract already has the seasonal premium priced into it. Here is the gasoline futures curve.

Source:  ‏@SoberLook

7. There is too much ethanol in the US.

Source: @markets,  h/t Jake

8. This next chart shows power generation capacity increases in the US  - by state and by source.

Source: EIA

Finally, we have a couple of charts on asset management.

1. We've had quite a bit of "direct lending" capital raised in the last couple of years. Is the market saturated?

Source: @Preqin

2. Here are the largest ETF managers and their AUM.

Source: @FTMarkets

Turning to Food for Thought, we have 6 items this morning:

1. Medicare hospital readmission rate fell off sharply as Obamacare discourages readmission with the same diagnosis. Are patients being readmitted under a different diagnosis?

Source: BLS

2. Here is the RCP poll average for Trump vs. Clinton in the 2016 general election.

Source:  RCP

3. Top firms as rated by the employees.

Source: @StatistaCharts, h/t Jake

4. The new overtime wage rule for white-collar workers could significantly up the pay for University staff - forcing schools to raise tuition further. Scary.

Source: @WSJGraphics, h/t Jake

5. People are dumping pay-TV, getting their content from the internet instead.

Source: @bySamRo

Source: @bySamRo

Have a great weekend!