Archive - Apr 5, 2011 - Story

A quick look at today's market action confirms that we get even more purposeful obfuscation from Fed pundits whose only strategy continues to "baffle with bullshit." We also have the Services ISM, an episode of Flip that Bond, and the FOMC minutes.

One hour ago the PBOC announced the most recent Chinese rate hike, second in 2011, and fourth since October 2010, in the country's ongoing fight with excess-liquidity driven (both courtesy of the Fed and the PBoC itself) inflation, which has been running near a 28-month high of 5.1% hit in November. Benchmark one-year deposit rates will be lifted by 25 basis points to 3.25 percent, while one-year lending rates will be raised by 25 basis points to 6.31 percent, the People's Bank of China said in a statement on its website. The hike will be effective beginning Wednesday, April 6.

In what could easily be the biggest news of the day, even more important than the most recent Chinese rate hike, the one stock that determines the broader stock market level more than any other, Apple, may well get crushed today as index arbs dump it following news that the Nasdaq 100 intends to announce a rebalancing which will see AAPL drop from a 20% to a 12% weighing. According to the WSJ, the move is akin to what various exchanges do when they hike margin rates to prevent commodity prices from surging: "The rebalancing was driven in part by the seemingly unstoppable rise in Apple shares, which are up more than fourfold in the past two years. The tech company's big weighting means that a change in fortune for the maker of iPhones, iPods and iPads has a huge impact on one of the most heavily traded indexes in the market. After the rebalancing, which takes effect May 2, Apple will make up 12% of the Nasdaq-100." Whether this will be the end of the company's relentless rise remains to be seen although any impairment in the sensitive ecosystem of technical factors that has so far prevented any fund from selling the company may well be impaired at this point, leading to the first bona fide sell off in the name in the past 3 years.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 05/04/11