European morning wrap: Risk off Friday innit……

Two EU sources, one German source say Spain expected to make aid request for its' banks this weekend - Reuters Spain govt:  No comment on possible bank aid request this weekend. Reiterates no decision until after bank audits German govt spokesman: Decision on aid is up to Spanish government European Commission official: Spain has not requested aid Ex Bk of Spain governor Ordonez:  Spain economy 'extremely vulnerable' Spanish/German 10 year govt bond yield spread widens out to 487 bps from 466 early ECB's Nowotny: Eurozone economic growth will remain weak More Nowotny:  Asked on chance of rate cut next month, says we never precommit, we see increased downside risks to growth Even more Nowotny:  Zero deposit rate is possible to imagine.  Revival of ECB bond buying, another LTRO not on the horizon at the moment Bundesbank raises German 2012 GDP forecast to 1% from 0.6% German April trade surplus 16.1 bln, demonstrably better than Reuter's median forecast of 13.5 bln. Exports +3.4% y/y, imports -1.0% y/y Bank of France May business climate indicator for industrial sector falls to 93 from 94 in April Bank of France sees French Q2 GDP growth of -0.1%, down from first estimate of flat French April trade deficit -5.8 bln, as expected Italy April industry output -1.9% m/m, demonstrably weaker than Reuter's median forecast of -0.5% UK May producer output prices -0.3% m/m, +2.8% y/y.  Y/Y increase below expectations of +3.2% and lowest read since November 2009 Japan May economy watchers' survey service workers index 47.2, down from 50.9 in April.  Japan govt says pace of economic pickup is moderating AEP's crisis webchat    (takes a few seconds to come through) European stocks, oil, US treasury yields all lower yada, yada, yada.  You know the gig. Biggest worry at the moment is Spain.   The country seems like a rabbit caught in the headlights, paralysed and unsure what to do next. EUR/USD down at 1.2455 from early 1.2525, having been as low as 1.2446.  Sell stops were tripped though 1.2490 and 1.2460 accelerating the sell-off. More stops now seen through 1.2440. Cable down at 1.5430 from early 1.5490.  Forexlive reported buy orders in cable clustered down at 1.5400/10 and the session low as 1.5403.   How good are we? USD/JPY effectively unchanged on the day at 79.27.   That's a bit of a result for the USD/JPY bulls given general risk off backdrop and lower US treasury yields.  The benchmark 10 year US treasury is presently down at 1.1.5573% from 1.6150% early.