Good German data gives a boost

Following yesterday’s solid Apr (somewhat dated) manufacturing orders figure in Germany, at 6am they reported a slightly better than expected rise in Industrial Production for Apr. The DAX bounced off its lows in response and the S&P futures followed into positive territory. The Hungarian Forint is also at the high of the morning. Stress though remains in European credit markets as 5 yr CDS in France is at 100 bps, a record high and the French 10 yr yield is now the widest vs the German 10 yr since Apr ’09. The German/Spain 10 yr spread is at a fresh record with Spain CDS at a record high ahead of strikes today. Fitch put the UK on notice that their “fiscal challenge is formidable and warrants a strong medium term consolidation strategy.” UK 5 yr CDS is 96/100. Bernanke’s comments on the economy last night were no surprise and he implicitly reinforced continued easy money policy. Positively, the NFIB small biz index rose to the highest since Sept ’08.

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