Futures are looking down big this morning as a flurry of negative news hits the tape.
Last night South Korea failed to inform North Korea that they were practicing a live fire drill. Believing they were under attack, North Korea responded by firing 100 rounds of artillery at Yeonpyeong Island in the Yellow Sea. South Korea responded with 80 rounds of artillery and scrambled fighter jets to stop the firing. Two South Korean marines were killed and 15 soldiers and civilians were wounded. Many think this was something of an accident, but others believe it stems from the sanctions placed on North Korea over the Chenoan incident and because NK was found to have a new uranium enrichment facility. Whether a demand for attention or a mistake (unlikely), the markets have been rattled and rightly so. This is a subject that I have cautioned on this blog numerous times that did not simply go away. The best we can do is hope for international assitance and a diplomatic solution.
Spain had a basically failed 3-6 month bond auction. The sovereign sold 3.2B Euro vs. the 4-5B Euro that had been planned. Spanish CDS is approx 20 bps higher and the 10-year is at all time high spreads. The EUR/USD pair is trading a full 0.0156 lower at 1.3469.
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