G3 Recap 5-4-11

Main Items:

  • US ADP Employment increased 179k in April vs 198k expected and 201k previously
  • US ISM Non-Manufacturing dropped to 52.8 in April vs 57.5 expected and 57.3 previously. The new orders component dropped sharply to 52.7 vs 64.1 previously, while employment declined to 51.9 vs 53.7 previously
  • FT reported that Mexico bought nearly 100 tons of gold in February and March in an effort to diversify away from the USD.
  • Last night, Portugal reached an agreement on €78bn bailout which will be enough to cover financing needs for three years, and includes funds to support the banking sector. The government is also issued a new deficit reduction plan that is expected to cut the deficit to 5.9% this year vs 4.6% targeted previously, partially because prior year deficits were revised higher. Most terms, including the interest rate have not yet been disclosed.


  • Italian PMI Service printed 52.2 in April vs 53 expected and 53.3 previously. French and German final PMI also printed a bit lower.
  • UK PMI construction declined to 53.3 in April vs 55.9 expected and 56.9 previously


  • One of the side effects of COMEX hiking margins on silver apparently some Silver calendar arbitrageurs got destroyed. Forward 1 year silver calendar spreads have blown out to deep into backwardation territory, which hasn’t happened since 2006. The July 11 / July 12 silver futures price differential is graphed below.

    At just 1%, this isn’t a wide enough spread to arb but does appear to present interesting options for producers and merchants.