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The hangover from Angela Merkel’s comments weighed on stocks today as markets declined  0.6%.  As has been the trend on negative days the volume was extremely high with volume at the NYSE surpassing 1.5B shares.  Breadth was equally negative at 4:1.   The Euro actually managed to climb on the day as rumors of ECB intervention circled thru markets.  The move appears like another fruitless attempt at government intervention which only circumvents the real issue at hand. Trade The News reports that rumors of Greek defection were also making the rounds:

“Around 10:30 rumors made the rounds that the Greek finance minister was heard stating that Greece could consider leaving the Euro Zone, sending EUR/USD up more than a big figure. The Greek government denied the report, but the euro’s gains are lasting for the moment.”

It remains an environment of very high uncertainty and high risk as the European leaders clearly underestimate the severity of the problems they confront.  The very high minute by minute volatility in the market is a clear sign of investor skittishness.

From Daily Futures:

Germany’s Chancellor Merkel told Parliament that one of the reasons that Germany banned naked short-selling of government bonds was because the euro is in danger. The June euro jumped up 1.69 cents to $1.2376, the biggest daily gain this year.

U.S. Economy
The U.S. Labor Department said that the consumer price index was down .1% in April and up 2.2% from a year ago. The June 2011 eurodollar ended down .005 at 98.805.

Minutes from the Federal Reserve’s meeting in April said that “economic activity continued to strengthen and the labor market was beginning to improve.” Also, “participants cited a wide array of evidence as indications that underlying inflation remained subdued.”

Grains and Cotton
The winter wheat crop is getting rain today in Kansas and Oklahoma. July wheat was up 1.5 cents at $4.692.

The USDA said that 124,000 tons of U.S. corn was sold to unknown destinations in the current 2009-2010 season. July corn ended down a half-cent at $3.592.

The USDA said in today’s Livestock Outlook that “global demand for beef is anticipated to continue strengthening into 2011” and that “U.S. and global beef supplies will continue to be very tight as herd rebuilding is either in progress (United States) or herd sizes are just beginning to increase as a result of heifer retention (Australia and New Zealand).” August cattle were unchanged at 91.52.

For the pork market, the USDA said that “average hog prices in 2011 are likely to be lower than for this year due to higher pork production in quarters two to four.” August hogs closed up 1.10 at 82.80, helped by today’s lower U.S. dollar.

The Mortgage Bankers Association’s index of mortgage applications fell 27% last week to its lowest level in 13 years. The average rate on a 30-year fixed mortgage fell from 4.96% to 4.83% last week, the lowest since November of 2009. July lumber closed down $8.60 at $234.10, down over $100 from its high just four weeks ago.

Late yesterday, a USDA official estimated Brazil’s upcoming coffee crop at 55.3 million bags, up from 44.8 million bags a year ago. July coffee finished down 1.75 cents at $1.3250.

Energies – Distillate Demand Jumps Higher
The U.S. Department of Energy (DOE) said that crude oil supplies were up 200,000 barrels last week to 362.7 million barrels. Supplies of gasoline were down 300,000 barrels and heating oil supplies were down 700,000 barrels. July crude oil ended down .22 at $72.48, roughly $17 lower than the high just over two weeks ago.

The DOE also said that refinery use slipped from 88.4% to 87.9% of capacity last week. Over the past four weeks, gasoline demand was up 2.1% from a year ago and distillate demand jumped up 12.3% from a year ago.

Did Germany’s ban on naked short-selling take some fear out of the markets? August gold dropped $21.50 to $1,194.90.

More Currencies
Eurostat said that construction output in the EU-27 was up 6.8% in March and down 2.4% from a year ago.

Statistics Canada said that wholesale sales were up 1.4% in March, to C$44.4 billion.

Japan’s government said that industrial production was up 1.2% in March, stronger than expected.

The June Australian dollar fell 2.20 cents to 83.96, the lowest close in eight months, blamed on a weak consumer confidence report, Europe’s debt crisis, and concerns that China’s economy is slowing.

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