One Minute Macro Summary - Earthquake To Be At Least ¥2.75T Hit To Japanese GDP (For Now)

Tyler Durden's picture

Overview: Markets in positive territory this morning, despite mounting debt stress in Europe.

U.S.: MBA mortgage applications grew 2.7% v -0.7% the week prior. The increase exhibits a different trend than this week’s disappointing housing data which included a fall in February existing home sales and a -0.3% drop in the house price index v -0.2%E in January. More housing data to come today with new home sales at 290KE v 284K prior. The U.S. and its allies continue military efforts aimed at Libyan leader Muammar Qaddafi. The coalition is in the midst of deciding if a NATO group will take over command from current U.S. control.

Europe: In a 6-3 vote among its voting leaders, the Bank of England kept interest rates at current levels to wait to evaluate the effects of higher oil prices. An 8-1 vote also kept the QE program unchanged at £200B. Reports this morning put low probability on Ireland being able to cut interest rates on its bailout loans at this week’s EU summit that begins tomorrow amid further threats of senior bondholder haircuts. Meanwhile, the Euro has weakened this week in the lead up to the summit, as confidence in the meeting’s ability to resolve the debt crisis wavers. The Portuguese government will vote on proposed fiscal austerity measures today. Given the country’s political divide, approval appears unlikely, which would further stress the debt-strapped nation and lead it quickly to an EFSF tap. The prior talk of easily expanding the EFSF and providing for a steady ESM in 2013 appears full of flaws upon yesterday’s further review – with ratings, capital versus guarantees, and bond purchase mechanisms all large concerns. It now appears EFSF expansion will take until the end of June to be resolved according to news reports, which will not bode well for those issuers trying to play hardball with the group of payers. SOVXWE traded 10bp wider yesterday and traded into 174bp this AM. The EFSF news pushed the index wider to 177bp. Swedish consumer confidence sank to 19.0 v 20.3E and Danish consumer confidence fell to -0.8 v -2.0E; both represent declines from the month prior.

Asia: Japan’s government announced yesterday that damage due to the recent earthquake will reach $185B to $308B, an amount equivalent to the damage of almost four Hurricane Katrinas. That makes it the most expensive natural disaster the world has ever seen. The government also indicated that the earthquake will take -¥2.75T hit on GDP for the fiscal year that begins on April 1. An official from the PBOC told reporters that inflation will be high in the first half of the year (about 5%), but will slow in the second half, adding that interest rates are at a “comfortable” level. The World Bank also announced today that China’s economy may grow to be twice the size of America’s within the next twenty years. Singapore’s CPI increased 5.0% YoY v 5.4%E and -0.1% MoM v 0.6%E in February. Taiwan’s industrial production in February increased 13.28% YoY v 16.25%E and 17.19% prior. New Zealand’s 4Q10 GDP will be released later today and estimated at +0.7% YoY v 1.5% prior. Note that these figures will take a dramatic shift going forward due to New Zealand’s devastating earthquake earlier this year.

From Brian Yelvington of Knight Capital

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Spitzer's picture

Looks to be just another up day.

Thorlyx's picture

yep. Problem is, there won't be any dips more to buy.

Shit, too late.

oh_bama's picture

Did I tell you guys to BTFD a few days ago???



Now just wait. for the next dip. And the BTFD!!


cowdiddly's picture

Even the infamous Rally Monkey is wearing a tin foil hat.(with lead liner)

oh_bama's picture

The demage is NOTHING when compared with the 1 quadrillion yen QEs in the pipe!!

Go BOJ! !



Battleaxe's picture

Thankfully the economic toll is worse than the market toll.

cossack55's picture

I understand Japan's GDP definition has been changed to

Gross Damage Projections

ivars's picture

There are more and more double dip recessions coming forward (UK, New Zeeland, Japan) so If Portugal goes Irelands way, you can buy the dip at DJIA 10500 in May but beware to SELL in June at 11500 before stocks go down from July 2011-March 2012 and beyond. See this February 6th chart which predicted the dip on February 18th, and also continues to predict the current and coming dip to 10500 in June, but also predicts second recession in the USA in q1 2012 and decline in stocks prior to that to 9500 in 2011 and 7500 in March 2012:


Basic reason for second recession on top of all other "black swans" - Oil prices-also february 6th graph-let us see if the second peak in April ( Brent 125-130 USD) is also timed correctly:



A Man without Qualities's picture

As mentioned elsewhere, the Japanese figures do not include any costs linked to the nuclear accident.... so add a large number.

Judge Judy Scheinlok's picture

Bullish Nikkei-sons are true Kamikaze. The floor should drop very soon.

goldenbuddha454's picture

You can be sure if the winds were blowing that radiation towards Shanghai the Chicoms would be fit-to-be-tied!  As it is though, the winds are blowing that crap towards the USA so they don't give a damn.  Actually, they're probably looking at us like "those Americans deserve all they get" cause we're never paying them back for the junk bonds we sold them.  Excuse me, I mean treasury bonds.

sangell's picture

Until Japan gets that power plant under control any estimate on what the costs or impact on GDP will be are worthless. I note the US 80km evacuation zone ends just as Sendai begins. If the contaminated zone goes to 100km then you've got a city of 1 million people that needs to be 'replaced'. Extend it south towards Tokyo and you have the end of the world as we have known it.

vxpatel's picture

Surprised this hasn't gotten more airtime on ZH!


"If we continue down on the path on which the fiscal authorities put us, we will become insolvent, the question is when," Dallas Federal Reserve Bank President Richard Fisher said in a question and answer session after delivering a speech at the University of Frankfurt. "The short-term negotiations are very important, I look at this as a tipping point."


oogs66's picture

Sovx a few wider now 177.  Irish and Portuguese 10 year yields back to wides  9.9% and 7.5% respectively.  The HY market is getting a bit squishy.  No serious liquidation, but the bid side of market is flaky and small. 

The Axe's picture

If this market has proven to me ONE thing,,never fight a central bank when they create liquidity thru easy money policy.

goldenbuddha454's picture

If Tokyo gets thoroughly contaminated with the radioactive fallout, will it become like the Bikini Atolls where it will be uninhabitable for 100,000 years?

disabledvet's picture

obviously "this is not knowable." it get's to the heart of why in a NUCLEAR crisis it is LIES that you have to fear most.  Right now "this looks like Bhopal to me."

asteroids's picture

While QEII exists you can't short this market. Too dangerous. Wait in cash.