Archive - Feb 3, 2011 - Story

Earlier today, the ECB decided to keep rates at 1.00%, as expected. There were no major or even minor moves in the EUR pairs following the announcement indicating that rumors of a rate hike by the ECB are still very preliminary. Yet the one issue everyone wants to hear more information on is when the latest "rescue" ponzi scheme, the EFSF, will become active, which will allow Europe to wash its hands of all direct monetization allegations, and blame it all on a CDO. Of course, when the CDO itself implodes it will be Europe, and mostly Germany left to pick up the pieces, which is why Merkel is so far the only party which has refused to endorse the outright monetization power of the EFSF. For an update of the ECB's views on the EFSF watch the press conference starting any minute now.

• Violence Escalates After Gunfire Assault (WSJ)
• Yemenis Protest After Saleh Makes Concessions to Defuse Tension (Bloomberg)
• Here come subsidies: China allocates $228m for vegetable supply (China Economic Net)
• ECB Seeks to Shed ‘Uncomfortable’ Bond-Buying Duty (Bloomberg), because if it's a third party CDO monster, then it is nobody's fault really
• And minutes after our own headline... Oil Climbs on Egypt as Stocks Decline; Copper Hits $10,000 (Bloomberg)
• Senate Rejects Repeal of Health Care Law (NYT)
• Egypt Millionaires `Sacrificed' as Leadership Turns to Military (Bloomberg)
• S&P Says No Plans to Cut U.S. Rating in Medium Term (Reuters) and nobody has any plans to listen to S&P ever again
• White House Charts a New Plan (WSJ)

"ICE Futures U.S.®, Inc. (“Exchange”) is contemplating taking the following action effective with the March 2011 Cotton No. 2® futures contract. Cotton market participants who expect to carry positions in excess of the spot month position limit, 300 contracts, into the notice period would be required to file an exemption request form with the Market Surveillance Department. To be eligible for a notice period exemption under Exchange Rule 6.26 (Hedge Exemption), applicants would request a specific long or short position sufficient to cover the applicant’s bona fide hedging requirements for the contract month’s delivery month and the next succeeding calendar month."

As suggested last night, the escalation in Egypt, together with more riot news out of Yemen, and fear that tomorrow's Syrian "Days of Rage" will live up to their name, Brent Crude has pushed to the $103 psychological barrier (even as the Brent-WTI spread continue to be about $10, much as we speculated previously would be the case for a while). And speaking of psychological barriers, copper just passed a key one after it moved to a record north of $10,000/tonne for the first time "as investors bet that supply shortages and buoyant demand growth this year would keep fuelling a rally."

Markets dour in the early AM as oil rises on escalating geopolitical concerns. Yesterday’s ADP report was once again more bullish than expectations ahead of Friday’s Payroll data. The ADP “preview” of Friday’s job numbers reported a 187K gain v 140KE. The track record of the indicator was tarnished last month by divergent results as the indicator foresaw a 247K jump in payrolls while the BLS reported Private Payrolls rose only 113K. Today will see numbers for labor inputs, weekly claims data, factory orders, and ISM Non-Manufacturing data. Eyes remain on geopolitics and the European periphery ahead of tomorrow’s data. TBAC recommending Treasury issue 100Y bonds to lock in low rates.

Today's calendar has initial claims, productivity and costs, the January services ISM, factory orders for December, Bernanke's speech at the National Press Club and a weekly Fed Balance Sheet update. $7-9 billion 10 Year POMO - will it come at yesterday's massive S/A ratio? No 56-Day CMB auction today, means major excess liquidity influx.