Archive - Mar 10, 2011 - Story

• Brent crude futures fall $2 on dollar strength (Reuters)
• Inflation in Asia Strikes at Core (WSJ)
• China Central-Bank Adviser Urges Yuan Reform (WSJ)
• Prospect of China Bank Crisis Dismissed (FT) - we feel better already
• Europe’s Banks Face 5% Stress Test Ratio (FT) - Stress Test II is not Stress Test I
• Gold retreats in line with oil, but Libya underpins (Reuters) PM liquidations very likely if there is a sharp market pullback today
• Gaddafi tanks, jets strike deeper into rebel heartland (Reuters)
• FBI: ‘Sovereign citizen' cases on the rise (AJC, h/t Robert)
• Spain to Reveal Cajas’ Capital Hole in Fight Against Contagion (Bloomberg)
• Deficit Proposal Picks Up New Allies (WSJ)

After China was expected to post a $4.9 billion February trade surplus, the centrally planned economy demonstrated just how easy it is to shut all CNY "undervaluation" critics up, by posting a miraculous $7.3 billion trade DEFICIT in February, which just happened to be the largest in 7 years, following January's surging surplus. The result was due to a general contraction in both exports and imports during the month, but obviously a much larger drop in the former - Exports growth decelerated to 2.4% Y/Y in February (consensus forecast: 27.1% yoy) , down from 37.7% yoy in January. The implied month-on-month; seasonally-adjusted; annualized (s.a. ann.) growth rate was 40.7%, down from the 74.0% growth recorded in January. At the same time imports growth softened to 19.4% yoy in February (consensus forecast: 32.6% yoy) , down from 51.0% yoy in January. On a M/M seasonally adjusted annual basis, imports growth was 58.3% in February, down from 101.8% in January. And as the chart below shows, while February is traditionally the weakest export month for China, this level of surprise can only be attributed to political determination to once again shut up CNY critics, as the case that the renminbi is undervalued goes out of the window should this level of deficits persist. As for the party line, where something is always blamed for everything, this time it was the Lunar New Year's fault.

Markets in negative territory this morning on the combination of Spain’s credit rating downgrade and an increase in oil prices linked to Libyan President Qaddafi’s airstrike against his country’s own oil export centers yesterday. The U.S. budget remains in limbo as the Senate rejected both a Republican and a Democratic plan yesterday, showing that some compromise is necessary for the budget to move forward. Note that the government’s spending authority ends on March 18. Trade balance figures to be released this morning are expected to show a larger deficit for January at -$41.5BE v -$40.6 prior, owing to the increase in the price of oil imports. Treasuries rallied yesterday as European risk became more apparent. Today’s initial jobless claims are estimated to increase slightly to 376KE from last week’s 368K, the lowest level in nearly three years.

The great tightening wave in Europe is coming any minute now.... Just not yet. Below is Goldman's take on today's unsurprising move by the BOE to keep rates unchanged (although judging by the GBP some actually were surprised).

As expected, after hitting a simply ridiculous level of over 1.40, the EURUSD has started to materially roll over, and is now down to 1.383, with a first interim target in the mid 1.20s. The reason, in addition the billions in debt rollover this month (see Portugal's very weak auction yesterday), is the realization that the banking system in a Europe which is allegedly poised on the edge of tightening, is as weak as ever, and will have to take another dose of stress test placebos which will do nothing to assuage skepticism as spreads hit another day of record levels. Today, Moody's added insult to injury after downgrading Spain for the second time in 3 months, from Aa1 to Aa2, with a second level of insult arising from Moody's assessment that Spain may also suffer due to the recent surge in oil and see further downgrades as the oil rise would have Spain credit implications, adding that Spanish government has little control over region's spending.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 10/03/11

RealtyTrac has released a whopper of a foreclosure update. While total foreclosure activity had dropped in November when the first hint of fraudclosure was made evident, it subsequently stabilized and even increased slightly in January. Well, in February it took another step function lower, declining by a whopping 14% sequentially, and 27% Year over Year: the biggest decline in history. “Foreclosure activity dropped to a 36-month low in February as allegations of improper foreclosure processing continued to dog the mortgage servicing industry and disrupt court dockets,” said James J. Saccacio, chief executive officer of RealtyTrac. “While a small part of February’s decrease can be attributed to it being a short month and bad weather, the bottom line is that the industry is in the midst of a major overhaul that has severely restricted its capacity to process foreclosures. We expect to see the numbers bounce back, but that will likely take several months. And monthly volume may never return to its peak in March 2010 of more than 367,000 properties receiving foreclosure filings.” What is even more disturbing is the following: "Scheduled judicial foreclosure auctions (NFS) decreased 7 percent from
January and were down 49 percent from February 2010. Scheduled
non-judicial foreclosure auctions (NTS) decreased 11 percent from the
previous month and were down 7 percent from February 2010." This means that banks are now actively halting process in that most critical of non-judicial states - California, which means the bottom is about to fall off the market. And with the monthly cost of associated litigation in the  tens of millions for the big mortgage lenders, it is now a certainty that the banks are massively underreserved for the litigation tsunami that is coming their way, especially with MERS now out of the picture and on the verge of seeing its entire business model unwind, rendering tens of millions of mortgages potentially null and void.