Archive - Jan 14, 2011 - Story

A heavy day with retail sales, the CPI, industrial production, Michigan confidence, and business inventories….

Today brings another confirmation that the only trading vol remaining in risk asset is not in stocks, but mostly in FX. After the EURUSD was trading in the mid 1.33s, a sudden surge of buying by European desks overnight took it to well over 1.3450....Only to see the entire move undone in a matter of hours. According to Market News, the reason for the nearly two big figure move has to do with yield plays (obviously), although we are confident that those wishing to establish better short positions in the pair, alongside Goldman's prop desk for example, are certainly welcoming any justification for the surge, as fabricated as it may be.

After the PBoC raised the RRR for the fourth time in two months (and 6 times in 2010), and following the Christmas Day interest rate hike, Chinese stocks once again find themselves reacquainted with gravity as the SHCOMP was trading down 1.3% at last check. The hike will be effective January 20 and will bring the RRR to a record 19%. And this most ineffective of monetary interventions will certainly not be the last: according to Bloomberg, "China may boost reserve ratios by more than 200 basis points in 2011, according to HSBC Holdings Plc economist Qu Hongbin. Industrial Bank Co. economist Lu Zhengwei estimates the ratio may reach 23 percent." Unfortunately, this latest move is too little too late, as Chinese food prices are already starting to make the politburo uneasy about what the world central bank cartel's actions mean for rice prices (remember the 3Rs as predicted by ZH - as we predicted in October, the next bubbles are Rare Earths, Rice, and Rubber).

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 14/01/11

The theme of input price inflation in America seems here to stay, and the dynamics of passing on inflation through the supply chain and eventually the consumer will be vital to watch this year.