- Econ Appeared To Be Still Contracting
- Some Noted Concern About Implications Of Labor Mkt Weakness
- Some Thought Activity In Some Sectors Could Be Stabilizing
- Incipient Signs Contraction Could Be Slowing

Gold futures fell Tuesday for the first session in five as better-than-expected U.S. consumer-confidence data helped reduce gold's safe-haven appeal and as a rebound in the dollar curbed the metal's dollar-denominated prices.Gold prices have also managed to peel off of their lows, but still trade with weakness.
Gold prices are currently down 0.67% to $954.00 per ounce.

Popped to Y95.10 area as morning highs in the pair were breached but backtracked very quickly to current Y95.02 area as overnight high remains intact.

Apple Inc
Morgan Stanley upgraded the iPhone maker to “overweight” from “equal-weight,” saying the iPhone is feeding the company earnings growth that the market is missing.

Qwest Communications International Inc
Analysts at J.P. Morgan raised their rating to “overweight” from “neutral,” citing "relatively strong enterprise revenue trends, conservative guidance, upside from potential M&A, as well as an attractive valuation."

Rio Tinto PLC
The global mining company agreed to a 33% cut in iron-ore prices with Nippon Steel Corp., a possible benchmark for pricing the commodity this year amid a tumble in prices for finished steel.

General Motors Corp
Today is the deadline the automaker has set for its bondholders to reach a restructuring agreement, major hurdle GM needs to clear in order to avoid bankruptcy. Also, UAW officials will hear today how many more U.S. factory jobs GM will cut.

Saw high trades around $1.4001 in the last flurry higher but pair backs away again amid muted flows for trade around $1.3982, suggesting supply emerging ahead of the overnight high area.

After falling to $59.53 a barrel the price was stabilized above a level 61.00.
U.S. crude for July delivery had settled at $61.88 a barrel

The euro fell against the dollar on speculation last week’s gain by the most since March was too large to sustain, reducing the currency’s appeal.
“Euro bulls are running out of buying power,” said Andrew Chaveriat, a technical analyst at BNP Paribas SA in New York. A close below $1.3880 today will signal further declines in the common currency, he said.
The euro also slid versus the dollar as the Daily Telegraph quoted Jochen Sanio, president of the German regulator BaFin, as saying debt levels of banks will blow up “like a grenade” unless they participate in the government’s bad-bank plan.
“The report over the German debt situation isn’t helping sentiment toward the euro,” said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., part of the world’s largest interbank broker. The comments sound “fairly dire.”
German banks have 200 billion euros ($280 billion) of bad debt, Sanio said last week, according to the Telegraph. Write- offs may reach 816 billion euros, the newspaper reported, citing an internal memo from the regulator’s office. In an interview with Bloomberg News last week, Sanio said Germany is “more than able” to cope with the 200 billion euros of toxic assets that its banks still hold.
The Dollar Index, used by Intercontinental Exchange Inc. to track the greenback against the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, increased 0.1 percent to 80.137, paring an advance that pushed the trade-weighted measure as high as 80.780.
The Conference Board’s index of U.S. sentiment surged this month to 54.9, higher than forecast and the biggest gain since April 2003, the New York-based research group said today.
“We’ve seen such a huge turnaround relative to expectations in the data,” said Lauren Rosborough, a currency strategist at Westpac Banking Corp. in London. “That may well have stalled the move in the Dollar Index for the rest of today.”
The dollar posted its biggest weekly decline against the euro in two months last week on speculation a deterioration of U.S. creditworthiness will make assets such as Treasuries less attractive to investors.

Wall Street cheers signs that consumers' moods brightened in May.
Stocks soared Tuesday, following a choppy open, after a report showed consumer confidence rose to its highest level in 8 months.
The Conference Board's Consumer Confidence Index rose to 54.9 in May from 40.8 in April. Economists had expected the index to rise to 42.
The index now stands at its highest level since Sept., when it measured 61.4. But it is still low by historical standards.
Tuesday's advance comes despite a dour housing report, geopolitical tensions and concerns about the fate of General Motors and Chrysler.
Stocks ended last week essentially flat, but economic worries continue to hang over investors, who are coming back from a long weekend. U.S. markets were closed Monday for Memorial Day.
The S&P/CaseShiller Home Price Index, which tracks 20 of the largest housing markets, has plummeted 32.2% from its July 2006 peak and has fallen 32 straight months. It fell 18.2% in the previous quarter.
Treasury prices rose, with the yield on the benchmark 10-year at 3.42%. Treasury prices and yields move in opposite directions.
Oil for July delivery fell 27 cents to $61.42 a barrel ahead of an OPEC meeting later this week. Traders expect the cartel to leave output unchanged at the meeting.
COMEX gold for June delivery fell $11.40 to $947.50 an ounce.

European equity bourses are set to close higher Tuesday, having jumped into the black following the stronger than expected US consumer confidence data. Mining stocks have managed to gain
a little ground, offering some relief to the blue-chip indices after underperforming for most of the day. Weakness in oil and energy stocks has also eased off during the afternoon, with a rally in crude prices helping to push the sector higher, and with Royal Dutch Shell in London now in positive territory. Defensive stocks have also remained firm during the afternoon, with Tesco, British American Tobacco and Bayer AG leading gains. Financials have continued to lose ground however, particularly in London, where HSBC and Prudential are weighing heaviest.
FTSE +45.98 (+1.05%) at 4,411.27, CAC +27.54 (+0.85%) at 3,263.70, Dax +52.30 (+1.06%) at 4,970.75.

Ian Shepherdson, Chief U.S. Economist at HFE, says Mar Case-Shiller home prices show a disappointing worsening, implies "a loss of about $380B on the household sector, in just a month. Were this pace to continue, the loss of housing wealth this year would be roughly
equal to the entire GDP of China." He says this could keep consumption weak ahead. Mizuho economist Steven Ricchuito says "improvement in a number of the hardest hit areas was fully offset by accelerated deterioration in a number of other cities. Specifically, Los Angeles,
Miami, and Las Vegas all saw prices decline at a somewhat slower pace while cities like Chicago, Boston and New York all saw prices decline at at faster rate. This suggests that areas where foreclosures have been a big factor may have found a bottom but other areas are still searching for the bottom."

"Case-Shiller data show home price delcines are moderating "but there's no reason to believe that
house prices won't fall significantly farther, especially given the losses in the banking system and deteriorating jobs market."

EUR/USD: $1.4050, $1.3700
USD/JPY: Y96.70
AUS/USD: $0.7780
GBP/USD: $1.5750, $1.5700
USD/CAD: C$1.1075

They are lowering growth ests and raising unemployment ests (10.8% peak).

The S&P CaseShiller Home Price Index for March came in at 140.0. That is down from the prior reading of 143.1, which was revised incrementally lower. Meanwhile, the 20-City Composite for March showed a 18.7% decline, which is steeper than the 18.4% decline that was expected. The February reading was revised fractionally lower to show a 18.7% decline. Stock futures continue pointing to a lower start for the major indices.
There aren't many corporate headlines out this morning. As for economic data, the March S&P CaseShiller Home Price Index is due at 9:00 AM ET, followed by the Consumer Confidence Index for May at 10:00 AM ET. For now, market participants are taking their cues from a overseas trading, which feature sizable losses in Europe and Asia.

Dennis Gartman (thegartmanletter.com) - "The DOW: Are New Lows Possible?: We really don't want to believe that new lows lie ahead, but we have to be concerned that they are indeed possible given the technical deterioration of the past two or three weeks. A break definitively below 8200 would be a very serious breach of trust and would put the bulls very clearly upon the defensive and the bears would begin growling again in earnest."

Meeting decent resistance around mentioned level of $1.5880, with rate continuing to press up against this level as euro-sterling extends slippage to stg0.8758. A break above $1.5880 to open a move toward $1.5900/10.

Data released:
06:00 Germany Import prices (April) -0.8% 0.2% -0.4%
06:00 Germany Import prices (April) Y/Y -8.6% -7.7% -7.1%
06:00 Germany Import prices excluding oil (April) Y/Y -3.4% - -1.8%
06:00 Germany GDP (Q1) preliminary -3.8% -3.8% -2.2%
06:00 Germany GDP (Q1) preliminary Y/Y adjusted -6.9% -6.9% -1.8%
06:45 France Consumer spending (April) 0.7% - 1.1%
06:45 France Consumer spending (April) Y/Y 0.6% - 0.6%
08:00 EU(16) Current account (March) adjusted, bln -6.5 - -7.8 (-8.1)
08:00 EU(16) Current account (March) unadjusted, bln -3.5 - -2.1 (-2.3)
09:00 EU(16) Industrial orders (March) -0.8% 0.8% -0.6%
09:00 EU(16) Industrial orders (March) Y/Y -26.9% -30.6% -34.5%

The yen and the dollar rose after Yonhap News reported that North Korea carried out a missile experiment a day after conducting a nuclear test that provoked international condemnation.
The yen strengthened after Yonhap said Kim Jong Il’s government test-fired two missiles, stoking demand for the currency as a refuge.
The euro fell for the first time in seven days against the dollar after Britain’s Daily Telegraph cited a German banking regulator as saying debt at the nation’s biggest lenders may increase.
The euro slid as the Telegraph quoted Jochen Sanio, president of Germany’s regulator BaFin, as saying the debt levels of German banks will blow up “like a grenade” unless they participate in the government’s bad bank plan.
German banks have 200 billion euros ($280 billion) of bad debts Sanio said last week, according to the Telegraph. Write- offs may reach 816 billion euros, the newspaper reported, citing an internal memo from the regulator’s office. In an interview with Bloomberg News last week, Sanio said Germany is “more than able” to cope with the 200 billion euros of toxic assets that its banks still hold.

EUR/USD opened around $1.3996. A report in today's Telegraph dragged the euro down under $1.3900, extending the base to $1.3869, before a recovery back towards $1.3900.

EUR/USD: $1.4050, $1.3700
USD/JPY: Y96.70
AUS/USD: $0.7780
GBP/USD: $1.5750, $1.5700
USD/CAD: C$1.1075

EUR/GBP squeezing lower, breaks under European morning lows of stg0.8775 and extends into area of reported demand placed down to stg0.8765. Below here and rate can ease on toward stg0.8750. Move seen allowing cable to break above resistance at $1.5830 and move on to$1.5845. Resistance in cable seen between $1.5850/60.

The dollar recovered some ground on Tuesday, pulling away from a five-month low as investors focused on problems outside the US.
The dollar suffered last week, with investors becoming increasingly concerned over the risk of the US losing its AAA credit rating as the country continues to rack up debt.
The dollar, which last Friday hit a five-month low of $1.4050 against the euro. The dollar also climbed against the pound, the Swiss franc and against the yen.
European markets were open on Monday, however, and German-based Ifo think tank's business climate index fell short of market expectations, suggesting that any recovery in the euro zone's biggest economy will take more time.
Figures on Tuesday confirmed that Germany's economy shrank in the first quarter at its fastest pace since reunification in 1990, while euro zone industrial new orders fell unexpectedly in March.

1. EMU 2010 inflation above 2009; definitely below 2.0%
2. ECB non-standard measures adequate for now
3. Must allow time for non-standard measures to take effect

Resistance 3:Y96.70
Resistance 2: Y96.00
Resistance 1: Y95.20
Current price: Y94.92
Support 1: Y94.40
Support 2: Y93.80
Support 3: Y92.60
COMMENTS: Dollar still holds within the range. Support remains near session low (Y94.40). Stronger levels remain Y93.80 (Friday's low) and Y92.60 (area of Feb 9 high and 20 low). Resistance is marked in the field of Monday's session high Y95.20 (level of 23,6 % FIBO of Y99,55-Y93,80 falling and area of May 13-14 low). Overcoming of the given level will open road to Y96.00 (38,2%). Further is not excluded growth to Y96.70 (peak on May 13 and 19, 50,0%).

Resistance 3:Chf1.1130
Resistance 2:Chf1.1050
Resistance 1:Chf1.0920
Current price: Chf 1.0909
Support 1:Chf1.0820
Support 2:Chf1.0700
Support 3: Chf1.0540
СOMMENTS: Dollar tries to recover, holding near session high at Chf1.0920 (minor resistance). Above the rise may extend to Chf1.1050 (May 21 high), then - to Chf1.1130. Support is near session low on Chf1.0820, further - near Chf1.0700 and at Chf1.0540 (0.886% of Chf1.0368-Chf1.1967 move).

Resistance 3:$1.6100
Resistance 2:$1.6020
Resistance 1:$1.5950
Current price: $1.5811
Support 1: $1.5780
Support 2: $1.5720
Support 3: $1.5600
COMMENTS: Cable remains under pressure with minor support comes at session lows on $1.5780. Below losses may widen to $1.5720. Stronger level is near $1.5600 (23.6% Fibo of $1.4440 - $1.5950 rise). Resistance comes at session high on $1.5950. Next target comes at $1.6020 (38.2% of $2.0150 - $1.3481 decline). Further resistance is near channel line from May 18 between $1.6100/10 zone.

Resistance 3: $1.4100
Resistance 2: $1.4020
Resistance 1: $1.3940
Current price: $1.3883
Support 1: $1.3800
Support 2: $1.3740
Support 3: $1.3630
COMMENTS: Euro declines with strong support comes at $1.3800 (38.2% of $1.3420 - $1.4050 rise). Below correction may extend to $1.3740 (50%) and to stronger level on $1.3630 (channel support line from Apr 22). Resistance comes at $1.3940. Stronger level is near May 22 highs. Break above will point to channel resistance line from Apr 22 on $1.4100.

Silver hit fresh highs for the year last week, with the outlook remaining positive while above the daily moving averages. Mid-August highs at $15.11 seen as the next target, followed by $15.29 (61.8% retracement of the move from $19.47 to $8.54). Support comes at $14.56 (5-day moving average).

EUR/USD
Offers: $1.3900
Bids: $1.3850/40

GBP/USD
Bids: $1.5780, $1.5760/50

USD/JPY
Offers: Y94.85/90
Bids: Y94.50/40, Y94.00

EUR/JPY
Bids: Y131.00/130.80

GBP/USD breaks under $1.5800, as market probes for reported stops. Rate extends lows to $1.5794, currently holding under the figure. Next
support noted at $1.5780 ahead of $1.5760/50.

Following the break below $1.3925 rate extends easing to challenge mentioned support around $1.3900. Next reported stops seen on a break of $1.3890. Break here opens a deeper move toward $1.3850/40. Resistance now seen back at the broken support level at $1.3925.

06:00 Germany Import prices (April) -0.8% 0.2% -0.4%
06:00 Germany Import prices (April) Y/Y -8.6% -7.7% -7.1%
06:00 Germany GDP (Q1) preliminary -3.8% -3.8% -2.2%
06:00 Germany GDP (Q1) preliminary Y/Y adjusted -6.9% -6.9% -1.8%
07:15 Switzerland Employment Level (QoQ) (1Q) 3.96M 3.92M 3.96M


The euro fell for the first time in seven days against the dollar after Britain’s Telegraph newspaper cited a German banking regulator saying debt at the nation’s biggest lenders may increase.
“The report over the German debt situation isn’t helping sentiment toward the euro,” said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a part of the world’s largest interbank broker. The comments sound “fairly dire.”
“The credit-rating issue will continue to dominate the market and currencies or countries which are targets of speculation may come under pressure,” said Yuichiro Harada, senior vice president of the foreign-exchange division in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s second-largest banking group. “No country across the globe will be able to maintain a AAA rating.”
The dollar’s gains may be tempered on speculation bond sales this week will renew concerns that a record supply of Treasuries will jeopardize the U.S.’s AAA credit rating.



EUR/USD posted session high around $1.4020, before eased to $1.3930.

Comments by OPEC SecGen El-Badri as well as Saudi Arabia's Oil Minister Al-Naimi suggesting the cartel will not be reducing output further when they meet in Vienna this week, has been keeping the commodity under pressure during the session, with tensions in North Korea also adding some risk aversion. Torbjorn Kjus, Oil Analyst at DnB NOR, suggests OPEC will instead focus on compliance to the current quotas when they meet on Thursday, and suggests the increase in crude prices of around 30% since the group last met, as well as its seeming ability to hold above the $60/bbl level, is a "important point" why the group will not change output. WTI Nymex crude is currently off 69 cents at $60.57.

Nikkei +121.19 +1.30% 9,347.00
Topix +7.12 +0.80% 883.00
CAC +15.35 +0.48% 3,243.32
DAX +4.44 +0.09% 4,923.19

Japanese stocks rose for the first time in three days, led by steelmakers on speculation prices for the alloy will stabilize. Stocks pared gains on concern a nuclear test by North Korea will ratchet up political risk in the region.
JFE Holdings Inc., Japan’s No. 2 steelmaker, jumped 3.7 percent after the Nikkan Kogyo newspaper said Toyota Motor Corp. won’t ask for deeper price cuts. Nippon Steel Corp., the world’s No. 2 maker of the alloy, gained 2.7 percent to 348 yen. Kobe Steel Ltd. jumped 4.4 percent to 166 yen.
Komatsu Ltd., the world’s second-biggest maker of earthmovers, and rival Hitachi Construction Machinery Co. climbed more than 2 percent after Goldman, Sachs & Co. raised them to “buy.” Defense industry suppliers Ishikawa Seisakusho Ltd. and Howa Machinery Ltd. surged at least 9.1 percent after North Korea’s bomb test.

European stocks rebounded thanks to gain in health-care companies.
Sanofi climbed 1.3 percent to 44.425 euros after the French drugmaker received a $190 million order to make swine flu vaccines from the U.S. Department of Health and Human Services.
Most stocks in Europe fell earlier as North Korea conducted its first nuclear test in three years and German business confidence rose less than estimated, offsetting an advance in health-care shares.
Porsche SE retreated 3.3 percent on speculation the maker of the 911 sports car may need to raise more financing. Sanofi- Aventis SA climbed for the first time in three days after the French drugmaker got a $190 million order from the U.S. government to make swine-flu vaccines.
Germany’s Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, increased to 84.2 in May from 83.7 in April. Economists expected a gain to 85. The index reached a 26-year low of 82.2 in March. IFO didn’t meet expectations and it’s still at a low point of activity.

Monday U.S. markets were closed for Memorial Day holiday.

Resistance 3:Y96.70
Resistance 2: Y96.00
Resistance 1: Y95.20
Current price: Y94.68
Support 1: Y94.40
Support 2: Y93.80
Support 3: Y92.60
COMMENTS: Support is marked in area of session low (Y94.40). Stronger levels remain Y93.80 (Friday's low) and Y92.60 (area of Feb 9 high and 20 low). Resistance is marked in the field of Monday's session high Y95.20 (level of 23,6 % FIBO of Y99,55-Y93,80 falling and area of May 13-14 low). Overcoming of the given level will open road to Y96.00 (38,2%). Further is not excluded growth to Y96.70 (peak on May 13 and 19, 50,0%).

EUR/USD: $1.4050, $1.3700
USD/JPY: Y96.70
AUS/USD: $0.7780
GBP/USD: $1.5750, $1.5700
USD/CAD: C$1.1075

Resistance 3:Chf1.1120
Resistance 2:Chf1.1050
Resistance 1:Chf1.0930
Current price: Chf 1.0851
Support 1:Chf1.0770
Support 2:Chf1.0700
Support 3: Chf1.0640

СOMMENTS: Dollar holds within the narrow range with resistance comes at channel line from May 18 on Chf1.0930. Above the target is on May 21 high at Chf1.1050. Stronger level is near channel line from Apr 22 on Chf1.1120. Strong support comes at Chf1.0770 (channel line from Mar 17). Below losses may extend to Chf1.0700 and Chf1.0640.

Resistance 3:$1.6100
Resistance 2:$1.6020
Resistance 1:$1.5940
Current price: $1.5911
Support 1: $1.5830
Support 2: $1.5750
Support 3: $1.5630
COMMENTS: Cable tested Friday’s highs and retreated. Above $1.5940 (session high and Friday’s high) the target comes at $1.6020 (38.2% of $2.0150 - $1.3481 decline). Further resistance is near channel line from May 18 at $1.6100/10. Support is at session low on $1.5830. Stronger level is around $1.5750 (23.6% of $1.5130 - $1.5940 move). Below losses may extend to $1.5630 (38.2%).

Resistance 3: $1.4360
Resistance 2: $1.4140
Resistance 1: $1.4040
Current price: $1.3991
Support 1: $1.3940
Support 2: $1.3820
Support 3: $1.3770
COMMENTS: Euro holds steady. Support is near 5-days channel line at $1.3940, below – on $1.3820. Strong resistance comes at $1.3770 (23.6% Fibo of $1.2880 - $1.4050 move). Key resistance is around Friday’s highs on $1.4040 with a break above will target $1.4140 and then - $1.4360 (Dec 29’2008 high).

High Low Close
EUR/USD 1.4034 1.3956 1.4013
GBP/USD 1.5939 1.5833 1.5918
USD/JPY 95.19 94.41 94.83
USD/CHF 1.0871 1.0815 1.0827

EUR/JPY 133.41 132.04 132.89
EUR/GBP 0.8820 0.8785 0.8807
GBP/JPY 151.50 149.79 150.96
GBP/CHF 1.7275 1.7189 1.7236

Change % Change Last
Nikkei +121.19 +1.30% 9,347.00
Topix +7.12 +0.80% 883.00
CAC +15.35 +0.48% 3,243.32
DAX +4.44 +0.09% 4,923.19

06:00 UK Nationwide house price index (May) - -0.4%
06:00 UK Nationwide house price index (May) Y/Y - -15.0%
06:00 Germany Import prices (April) 0.2% -0.4%
06:00 Germany Import prices (April) Y/Y -7.7% -7.1%
06:00 Germany Import prices excluding oil (April) Y/Y - -1.8%
06:00 Germany GDP (Q1) preliminary -3.8% -2.2%
06:00 Germany GDP (Q1) preliminary Y/Y adjusted -6.9% -1.8%
06:45 France Consumer spending (April) - 1.1%
06:45 France Consumer spending (April) Y/Y - 0.6%
08:00 EU(16) Current account (March) adjusted, bln - -8.1
08:00 EU(16) Current account (March) unadjusted, bln - -2.3
09:00 EU(16) Industrial orders (March) 0.8% -0.6%
09:00 EU(16) Industrial orders (March) Y/Y -30.6% -34.5%
14:00 USA Consumer confidence (May) 42.0 39.2
23:50 Japan Trade balance (April) unadjusted, trln - 0.011
23:50 Japan BoJ meeting minutes (30.04)