A look at the day ahead in U.S. and global markets from Mike

Dolan

This week's bout of bond market anxiety eased a touch on

Thursday, but investors wary of heavy sovereign debt sales and

election uncertainty are bracing for a jumpy June.

And the dollar is lapping it all up.

At the root of the week's angst has been more evidence of

still-brisk U.S. economic growth and sticky worldwide inflation

that questions the degree of interest rate cuts ahead that have

been long-assumed by markets. Jobless updates and a GDP revision

top today's diary.

And as the Federal Reserve and other central banks turn

incrementally more hawkish, they're complicating the heavy debt

auction schedules for many governments over the month ahead.

This week has seen a blizzard of new Treasuries and signs of

some indigestion were evident in tepid demand for near $300

billion of notes and bonds sold on Tuesday and some $44 billion

of 7-year paper yesterday.

The combination of rates worries and debt sales has taken

its toll. U.S. 10-year yields topped 4.75% on Wednesday for the

first time in four weeks, though they have pulled back a touch

from that level ahead of today's U.S. open.

And despite a European Central Bank rate cut being a

nailed-on certainty for next week, the jump back in long-term

yields spread to Europe too. Euro zone benchmark German 10-year

yields hit another six-month high on Thursday with

above-forecast German annual inflation numbers for May cause for

concern ahead of Friday's euro-wide readout and dragging

full-year ECB easing bets lower.

All of which makes an uncomfortable backdrop to what's set

to be the heaviest month of the year for net sovereign debt

issuance. New government bond supply net of redemptions and

central bank purchases is due to rise to $340 billion in June

for the United States, euro zone and Britain, according to data

from lender BNP Paribas.

The European debt world is also keeping tabs on credit

rating updates for Italy, France, Greece and Ireland due

tomorrow.

The latest bond market judder has spilled over to equity

markets again, dragging Wall St stocks back from new highs on

Wednesday and weighing on stocks across Asia earlier too.

S&P500 futures remained in the red first thing on Thursday -

with implied volatility for the next month jumping back

close to 15 for the first time since May 2.

What's more that month ahead now captures a wave of

electoral uncertainty - the first televised U.S. presidential

debate on June 27, European Parliament elections on June 6-9,

India's election result next week, this weekend's Mexican

elections and the run-up to UK elections on July 4.

South Africa's rand fell 1% on Thursday and the

country's benchmark equity index dropped more than 2%

after early election results there showed the African National

Congress on course to lose the parliamentary majority it has

held for 30 years - ushering in an uncertain period of messy

coalition building.

In company news, Salesforce ( CRM ) forecast second-quarter

profit and revenue below Wall Street estimates on Wednesday due

to weak client spending on its cloud and enterprise business

products, sending its shares down more than 16% after the bell.

Top U.S. independent oil and gas producer ConocoPhillips ( COP )

agreed to buy Marathon Oil ( MRO ) for $22.5 billion,

the latest in a series of mega-deals in the energy industry.

Shares of Marathon Oil ( MRO ) rose 9% on Wednesday while ConocoPhillips ( COP )

fell 4%.

BHP's investors welcomed the top global miner's

decision to walk away from a $49 billion plan to take over Anglo

American, which rejected three proposed offers from its

bigger rival over the past six weeks.

And Saudi Arabia may announce a landmark secondary share

offering in oil giant Aramco later on Thursday, pending final

approval, people with knowledge of the matter said.

Key diary items that may provide direction to U.S. markets later

on Wednesday:

* U.S. second estimate of Q1 GDP and PCE, preliminary Q1

corporate profits, weekly jobless claims, April international

trade balance, April wholesale/retail inventories, April pending

home sales

* Dallas Federal Reserve President Lorie Logan and New York Fed

chief John Williams speak; Bank of England Governor Andrew

Bailey speaks; European Central Bank policymaker and Irish

Central Bank chief Gabriel Makhlouf speaks; Reserve Bank of New

Zealand governor Adrian Orr speaks

* South Africa Reserve Bank policy decision

* NATO foreign ministers hold informal meeting in Prague

* US Treasury sells 4-week bills

* US corporate earnings: Costco, Best Buy, Dollar General,

Hormel Foods, Ulta Beauty, NetApp, Cooper Companies

(By Mike Dolan, editing by Nick Macfie.

[email protected])