Archive - Feb 13, 2013 - Story

Platinum and palladium surged Tuesday on renewed concerns that supplies of the platinum group metals will shrink. Zimbabwe's government has given platinum producers two years to begin refining the precious metals in Zimbabwe. This means that production of platinum will drop, because mining companies are now expected to build refineries – something which they may not do, due to the real risk of confiscation and nationalisation of assets. Both metals climbed more than 1% yesterday with platinum for April delivery rising $21.10 to settle at $1,717.2/oz. Palladium for March delivery rose $12.80 to $771.40/oz. "The worry is that it's going to restrict production," said James Steel, chief commodities analyst at HSBC in New York. "That was the prime motivator for the price movement today."

The beginning of every year under the New "centrally-planned" Normal regime is no stranger to seemingly relentless rallies: while in the first 29 trading days of 2013 alone, the benchmark S&P 500 Index has gained a respectable 6.5%, such initial strength out of the gates has in fact been the norm over the past three years, with the S&P 500 returning 7.5% and 5.7% during the first 29 trading days of 2012 and 2011, respectively. And, just like in 2013, both prior occasions were spun by pundits as indicative of great rotations, economic recoveries and what not, until reality reasserted itself when the gobs of liquidity pumped by western central banks finally made their way to China and sent local inflation surging at which point China pulled the plug in the "great reflation." This time will not be different, especially since as we showed yesterday, the market is now more bullish than 99% of all prior readings. And while the recent spike in the market has been less acute than on previous occasions, what is notable about the current rally is the duration without any marked correction. As the following chart from Stone McCarthy shows, since March 2009, there have been only 4 times in which the rally continued for a longer period of time without a notable, or >5%, correction.

Just like yesterday, it was some anonymous Yen vigilante smacking down the USDJPY saying the initial G-7 statement was misinterpreted, so today it is the ECB's turn, which just smacked down the EUR royally, for the second time in a week following last week's Mario Draghi comments, when it said that:

• THE ECB IS WORRIED EURO STRENGTH WILL HURT RECOVERY IN CRISIS STATES

And just like yesterday the refutation came via shady pathways, i.e., an anonymous leak in D.C., so today, apparently the information comes from that venerable ECB conduit: Bild. What can one say - all is fair in central bank love and currency war.

• Obama Paints Wider Role for Government in Middle Class Revival (BBG)
• Obama to Seek a New Trade Deal With EU (WSJ)... or this is strawman why 2016 GDP will be higher
• Mobile phone sales fall for the first time since 2009 (Telegraph)
• Sequester Looms, No Deal in Sight (WSJ)
• Neither US party swallows a compromise (FT)
• Embattled Economies Cling to Euro (WSJ)
• For China, Spending Is Harder Than It Looks (WSJ)
• Bank of England's Sir Mervyn King says recovery in sight (BBC) - just a little more inflation first
• G7 fails to defuse currency tensions (FT)
• Japanese Leader Urges Firms to Boost Wages (WSJ) - so does the US one
• Fed Bank Chiefs Back Money-Fund Overhaul (WSJ), or force everyone out of MMFs and into stocks

Following yesterday's G-7 announcement which sent the USDJPY soaring, and its embarrassing "misinterpretation" clarification which undid the entire spike, by an anonymous source in the US who said the statement was in fact meant to state that the Yen was dropping too fast and was to discourage "currency wars", it was only a matter of time before another G-7 country stepped into the fray to provide a mis-misinterpretation of the original G-7 announcement. That someone was the BoE's outgoing head Mervyn King who at 5:30 am eastern delivered his inflation reporting which he said that "it’s very important to allow exchange rates to move," adding that "when countries take measures to use monetary stimulus to support growth in their economy, then there will be exchange rate consequences, and they should be allowed to flow through." Finally, King added that the BOE will look through CPI and relentless UK inflation to support the recovery, implicitly even if it means incurring more inflation.