Archive - Aug 30, 2010

Last week I mentioned that barring any additional intervention (monetary or otherwise) stocks would roll over. That is precisely what happened with the S&P 500 falling to test MAJOR support around 1,040 twice.

We looked about read to fall off a cliff until Friday when Fed Chairman Ben Bernanke stated in his speech that the Fed stands ready to do whatever is needed to fight the financial crisis. It wasn’t a direct monetary intervention, but in these desperate times verbal intervention is good enough, and traders gunned the S&P 500 higher back into the gap created by the Monday/Tuesday sell-off.

• Bank of Japan’s Moves Fail to Contain Yen (WSJ)
• ECB Likely to Extend Emergency Bank Support (FT)
• Which leads to the following - European Economic Confidence Highest in Two Years (BP) all on life support
• Bernanke Faces Scepticism on Policy Tools, May Need Fiscal Aid (Bloomberg)
• The Uncomfortable Mathematics of Monetary Policy (Reuters)
• Bubble at any cost - China Fortifies State Businesses to Fuel Growth (NYT)
• An end-of-summer puzzle for investors (Reuters)
• As nationalism rises, will the European Union fall? (WaPo)

• Bank of Japan expands bank-loan program as Yen's climb threatens expansion.
• ECB likely to extend emergency banking industry aid: reports.
• European markets rose in early trade, tracking gains in Asia.
• Fed confronts further signs of slowdown amid skepticism on policy tools.
• Pace of UK's GDP growth will slow sharply over the medium term: Comm Chambers.
• UK house prices fall most in 16 months as market hits 'repricing' phase.
• Singapore tightens loan limits to cool housing market.

The past three days of Risk On market action are all gone and forgotten, as the 250 pips of "BoJ FX intervention" have to be eliminated. As a result the USDJPY is 130 pips tighter compared to 8 hours ago, down to 84.6, and the AUDJPY and futures have followed suit. On the other end of the risk spectrum, the EUR is dropping like a rock, across every currency in the world, is testing 1.27 against the dollar, and is back down to a 1.30 handle vs the CHF. Elsewhere, Bund stops were triggered as the German bond futures hit fresh all time highs. All those who were expecting the rotation out of bonds and into stocks to begin, and bet accordingly, our condolences. Feel free to blame the BoJ.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 30/08/10

Financial shills often use the term “bubble” to conjure up images of imminent collapse. Thus, if the “bubble” doesn’t burst within two weeks of someone’s “bubble” proclamation, then this non-event provides loads of verbal ammunition for the financial shills to improperly validate their erroneous viewpoint that a bubble does not exist. And this guerilla tactic works for those that truly don't understand the definition of a Central Bank, artificially engineered "bubble."