Archive - Nov 2010 - Story

• Here is why Europe is not screeching about EURUSD 1.40: Bernanke Greenmail - Fed Helping Spanish Debt Keeps ECB Mum on Dollar (Bloomberg)
• More Mixed Signals: China cuts discount to mortgage rates (China Daily)
• China Waves Magic Central Planning Wand and Manufacturing Posts Biggest Gain in Six Months (Bloomberg)
• Dollar/yen Jump Short-Lived After Suspected Miss-Hit (Reuters)
• White House Considering New Tax Cut Plan, Washington Post Says (Bloomberg)
• Natural-Gas Futures Advance to Six-Week High as Heating Demand to Increase (Bloomberg)
• China says no significant cut for rare earth quotas (Reuters)
• Fed Risks Its Credibility on a Bowlful of Mush (Bloomberg)

• Asian stocks, emerging currencies, oil climb on China manufacturing, Korea data.
• Chinese factories get busy; Official PMI shows surprise gain, sends stocks higher.
• South Korea's inflation rate climbs to 20-month high, exports accelerate.
• US unemployment probably hovered near 10% as Fed discusses additional easing.
• 3M is using acquisitions, its own labs to diversify into areas as biometrics and fuel cells.
• Ambak to file for bankruptcy if prepackaged plan is unsuccessful.

Ambac decides to not pay its November 1 coupon payment. And with that the 30 day grace period clock on the company starts ticking. Bankruptcy is now imminent unless the ad hoc bondholder committee can find a way to fund a pre-pack DIP. Of course, a prepack coupled with bond churn in the next few weeks would wipe out $7 billion in NOLs, as a debt for equity traditionally qualifies as an ownership change when accompanied by rapid changes in bond owners. Additionally, the implications of what this now inevitable monoline bankruptcy means for mortgage insurance are not entirely clear, but certainly are not good.

Futures are still on fire, following a much stronger than expected manufacturing reading in China. As Bloomberg reports: "A purchasing managers’ index released by the logistics federation rose to 54.7 from 53.8 in September, with input prices climbing the most in six months. A second PMI, from HSBC Holdings Plc and Markit Economics, jumped to 54.8 from 52.9." What is less known is that European PMIs also jumped across the board. As Erik Nielsen points out below UK, Norway, Turkey and Russia all reported stronger than expected PMI readings. Nielsen tries to make the case that even a 1.40 EURUSD is not sufficient to bring Europe down as somehow this is the new goldilocks. We completely disagree, and so will the ECB once the dollar is pushed strongly beyond the 1.40 barrier on Wednesday. Lastly, all eyes are now on US ISM to be reported later, with a consensus estimate of 54. It will be somewhat confusing if in the race to devalue the fastest, every single economy ended up growing. Not to mention somewhat incredible. But if confirmed, it will only give further impetus to debase currencies, as the last resort of economic growth is validated as "working." Which of course will mean more strength for assets that can not be printed out of thin linen.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 01/11/10