Markets are largely ignoring some very negative indicators this morning, seeming to feel that further support from central banks is imminent.

Spain auctioned off 12- and 18-month bonds today, and had to pay rates above 5% in order to borrow for one year. This is a full 2% higher than last month's auction, and confirmss that Spain is indeed in deep trouble. Until a more complete understanding of how the EU is going to address Spain's liabilities is established, we can expect bond markets to continue demanding higher rates for any loans.

Continuing the trend of worrisome data, the UK reported that its Consumer Price Index fell on an annualized basis for the first time in over a year, and Germany reported that investor sentiment for the month of June fell to the lowest level the survey has seen since 1998, when Russia defaulted on its debt obligations.

However, European equity markets have posted gains so far today, and the euro has risen alongside them as traders cling to the hope that central banks will be forced to prop up the fragile global economy.


The data out of North America this morning was slightly better. Canada posted an excellent Wholesale Sales number for the month of April, expanding at a 1.5% annualized basis. This is the fastest rate of growth since May 2011, and while it is a lagging indicator, it did help the Canadian dollar somewhat, as USDCAD traded down to test the 1.0200 mark again today. That release, coupled with Monday's report that international investors are buying Canadian securities at a healthy pace, will support CAD in the near term, but a significant move to parity would likely be unsustainable anytime soon, as investors are still showing longer-term signs of severe risk aversion and concerns over global growth. Furthermore, the overall appetite for buying the defensive USD is still very well defined, and would likely only be reversed barring a significant policy announcement from the Fed or European leaders.

South of the border, the US reported building permits and housing starts for the month of May, with permits rising to 780K annualized and housing starts falling by 5% to 710K annualized. Equity market and the USD were little changed on the news, with stocks holding on to slight gains before the open and the USD remaining lower on the day.