Archive - Mar 2011

From Haaretz: "A bomb tied to a telephone pole exploded Wednesday at a crowded bus stop outside the International Convention Center in Jerusalem, just opposite the central station. At least 25 people were wounded in the incident, four of them seriously. All of the casualties have been evacuated to the Hadassah Hospital in Ein Karem. The Magen David Adom emergency services said that there were no fatalities. The blast could be heard throughout Jerusalem and blew out the windows of two crowded buses, No. 74 and No. 14. An eyewitness in the area at the time of the explosion told Haaretz that she heard a loud blast close to the central bus station and second later sirens began to wail and security forces rushed to the scene. Meir Hagid, one of the bus drivers, said he heard a loud explosion as he drove by the site, located near the main entrance to Jerusalem and its central bus station. "I heard the explosion in the bus stop," he said. He halted his vehicle and people got off. He said nobody in his bus was hurt." Reuters adds: "Israeli embassy spokesman in Washington issues correction, says Jerusalem blast not on bus and "apparently not a suicide attack." At last check Israel CDS were rather well bid.

Remain cognizant that what you are witnessing here is the compression of annual refresh cycles into a MATTER OF WEEKS!!! It was only two weeks ago that Samsung stated it was unhappy with its offering in relation to Apple’s iPad 2 and had to go back to the drawing board. Well, they are to the drawing board and back – 2 weeks later.

The Euro just eeked out a new high, invalidating the Head and Shoulders pattern and setting the stage for additional upside gains to 145 or even 150 if things really take off. It’s extraordinary given that the European Union continues to collapse (Portugal is next up on the block).This rally in the Euro has coincided with further weakness in the US Dollar, which has now taken out its 2010 low, leaving the 2009 low and 2008 lows as the final lines of support before we enter uncharted territory.

Now that Europe is expected to keel over any minute, starting with the collapse of the Portuguese government, and proceeding right through the bankruptcy of Ireland, the market is starting to once again wake up. The first snooze button: Irish 10 Year bonds just passed above 10%, with numerous stops hit (see chart) for the first time in history. For all those who missed Citi's recommendation to buy Ireland CDS in advance of an event of default, the report can be found here. Said CDS are still a bargain offered at 630, considering they hit 680 in January.

PMI should be dead by now. Why isn't it? IRA with the answer.

Per the Japan Nuclear Agency: the Radiation level at Fukushima reactor No. 2 at its highest level recorded so far. Only headlines for now. And just as the market was starting to buy the endless lies that things are getting better. And some more truthy news from Kyodo: Electric Power Co. said Wednesday it has observed a neutron beam, a kind of radioactive ray, 13 times on the premises of the Fukushima Daiichi nuclear plant after it was crippled by the massive March 11 quake-tsunami disaster.

As was first disclosed by Zero Hedge, PIMCO trimmed its Treasury holdings in February to zero. While many speculated that the reason is concern for global inflation, we now have the confirmation courtesy of a rhetorical Q&A with Saumil Parikh released by the Newport asset management giant. In a nutshell: "Setting aside immediate oil shocks, we believe global inflation has cyclically troughed and we see a secular upswing in inflation, which naturally will put upward pressure on interest rates. We see three key global factors as potentially adding to inflation over a long horizon: (i) The degradation of sovereign balance sheets and the structural inflexibility of fiscal deficits. (ii) Emerging markets used to export disinflation to the developed world, but over the secular horizon we see them as exporting inflation. (iii) As populations age, they tend to save less and consume more. Demographics may thus become an inflationary force globally, though possibly this risk will be balanced somewhat by demographics in emerging nations. In the near term, we anticipate most, though not all, global central banks are likely to err on the side of allowing inflation to rise above stated or implied targets during 2011. In the U.S., if the economic recovery sputters, the Fed could expand quantitative easing. But further deficit accommodation would pose inflation risks. Obviously nothing new here, and just a confirmation that in order to preserve the Wealth Effect, Bernanke will be forced to put the global Genocide (And Printing)Effect into overdrive.

According to Bloomberg, as of this moment there are 31 companies that have experienced temporary or permanent plant shut downs in earthquake-stricken Japan, resulting in the closure of 150 different facilities. How Goldman can say there will be no GDP impact to Japan with a straight face is beyond our meager comprehension.

Tokyo's utility company said on Wednesday that black smoke has been seen emerging from Unit 3 of the crippled nuclear plant in northeastern Japan, prompting a new evacuation of the complex. Officials with Tokyo Electric Power Co. said on Wednesday that workers from the entire Fukushima Dai-ichi plant have been temporarily evacuated. Operators of the power station have been desperately trying to cool the reactors and spent fuel pools at the plant after it was damaged by this month's tsunami, which knocked out power to the cooling systems. Unclear if TEPCO has any other good news straw men up its sleeve post the completion of Operation Power Chord. We still believe a concrete sarcophagus will be the next step.

Markets in positive territory this morning, despite mounting debt stress in Europe. MBA mortgage applications grew 2.7% v -0.7% the week prior. The increase exhibits a different trend than this week’s disappointing housing data which included a fall in February existing home sales and a -0.3% drop in the house price index v -0.2%E in January. The Portuguese government will vote on proposed fiscal austerity measures today. Given the country’s political divide, approval appears unlikely, which would further stress the debt-strapped nation and lead it quickly to an EFSF tap. It now appears EFSF expansion will take until the end of June to be resolved according to news reports, which will not bode well for those issuers trying to play hardball with the group of payers. SOVXWE traded 10bp wider yesterday and traded into 174bp this AM. Japan’s government announced yesterday that damage due to the recent earthquake will reach $185B to $308B, an amount equivalent to the damage of almost four Hurricane Katrinas. That makes it the most expensive natural disaster the world has ever seen. The government also indicated that the earthquake will take -¥2.75T hit on GDP for the fiscal year that begins on April 1.

Another quiet day on the scheduled news front with just new home sales on the docket and a speech by Bernanke.

So much for that $25 million EGPT ETF as being a leading indicator. AP dscribes what can only be summarized as the funniest plunge-protection free market reopening in history: "Shares on Egypt’s stock exchange plunged Wednesday as the market
reopened after being shut for nearly two months because of the mass
protests that toppled former President Hosni Mubarak. Egypt’s finance minister was on hand as men dumped confetti on the trading floor to mark the resumption of trading. But within seconds of the opening, trading was once again halted as an intense sell-off drove shares below pre-set limits put in place to slow any sharp declines. The market reopened half an hour later. The benchmark EGX 30 index was trading down 9 percent at 5,137 points by early afternoon, recovering slightly from a drop of nearly 10 percent earlier. Finance Minister Samir Radwan called on investors not to panic." Of course, where some see panic, others may see responsible selling of liquid assets as the clusterflock of black swans is now flying high in the troposphere and following the Gulfstream.

The latest news out of Tokyo, and the reason why the Nikkei took a big turn lower in overnight trading, is that according to the latest disclosure by Tokyo authorities on Wednesday, "water at a purification plant for the capital of 13 million people had 210 becquerels of radioactive iodine -- more than twice the safety level for infants." While the threshold itself may not be all that material, it merely reinforces the perception that either the government is covering up something far more sinister, or the authorities have lost control of the situation, with incremental bad news creeping up every single day. As a result, as we have claimed from the very beginning, one of the world's most populous cities, located just 150 miles away from what may soon be the next Chernobyl per prior whistleblower disclosure, could likely soon be a ghost town with dire implications for the Japanese and world economy.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 23/03/11

Current positioning is remaining firm, we're seeing the expected pullback in EURUSD, but the pair remains in the strong long zone overall. With the release of the Annual Budget in the UK at 8:30 am EST we expect some volatility with GBP crosses, this could have an impact on retail positioning. New Home Sales out of the US at 10:00 EST is a likely catalyst today if we get a major deviation from expectations.