Archive - May 12, 2011 - Story

Following last week's surge to 474,000, everyone will be seeking confirmation of whether the dramatic deterioration in labor conditions is permanent or merely "seasonally adjusted." We also get PPI and retail sales data, and the last of three auctions ($16 billion in 30 Year notes) which effectively puts the US over the ceiling. Lastly, Bernanke talks to the Senate Banking Committee on regulatory issues.

And so the stealthy campaign by Europe to asset strip its debtor prison nation continues. After on Saturday it was made clear that Europe will force Greece to issue an effective DIP loan ahead of its own bankruptcy, collateralizing post-petition creditors, and pushing existing sub noteholders lower in the cap structure, so the same scheme will now be used by Europe to grant Portugal rescue funding in exchange for Finland's "agreement" to help save the country. Per Bloomberg: "Finland will back a bailout for Portugal provided the third euro member to require aid in 12 months agrees to conditions including state asset sales. In addition, Finland wants a guarantee that bailout donors will get their loans repaid before private investors, he said." Which simply said, means that as PIIGS, already held hostage by a monetary union which threatens with world extinction should it be unwound, and by bankers who promise to never lend money should they be forced to take even once cent in senior debt impairments, will next be forced to literally sell themselves off at n blue light special auctions, where the liquidation sale biggest bidders will be none other than the very same financial institutions who have put these countries in their terminal predicament. Incidentally, all this is coming to municipalities and local governments in the US very, very soon.

For those wondering what is causing today's most recent commodities drubbing look no further than the PBOC, which a few minutes ago announced it was hiking the RMB deposit reserve ratio by 50 basis points. Following the hotter than expected CPI print from Tuesday night, this is not unexpected, yet it merely makes the stagflationary outcome even more possible, as aside from inflation all other economic indicators pointed to a sharp slow down. And while China is tightening, Europe, as we predicted, will soon be forced to undo its most recent foolish rate hike, and likely loosen substantially following a crunch in the continent's industrial production. "Production in the 17-member euro area slipped 0.2 percent from February, when it advanced 0.6 percent, the European Union’s statistics office in Luxembourg said today. Economists had forecast a gain of 0.3 percent, the median of 25 estimates in a Bloomberg News survey showed. Production rose 5.3 from March 2010 after increasing an annual 7.7 percent in February." As a result, the EUR drop is causing the USD to jump yet again, causing futures and commodities to tumble. Simple. Or is it?

A snapshot of the European Morning Briefing covering Stocks, Bonds, FX, etc.
Market Recaps to help improve your Trading and Global knowledge