One Minute Macro Summary - Overestimating Support

Tyler Durden's picture

U.S.:  Markets down this morning after Japan's earthquake last Friday that sent shockwaves through the global economy.  Friday’s comments from the NY Fed President, William Dudley, indicated that QE2 will proceed as planned even though tomorrow’s FOMC meeting may show a more optimistic economic outlook.  The statement, along with PPI and CPI for February due out later in the week, will be closely watched.  We still believe that the Fed is unlikely to change its language to a more hawkish stance at this juncture.  Capitol Hill remains divided on the budget this week as Congress’s spending authority ends at the end of this week. A failure to reach a compromise on cuts or even another stopgap bill by then would close nonessential government services.

Europe:  Over the weekend, EU leaders drafted an update for the current sovereign rescue fund, creating a proposal two weeks ahead of schedule. The new package widely resembles German Chancellor Angela Merkel’s compromising proposal announced last Thursday. The revised bailout fund would maintain the originally intended size of €440B and would have the ability to buy government debt in the primary market, but to ECB President Trichet’s dismay, it still cannot purchase bonds in the secondary market.  Countries wishing to utilize the bond buying capabilities will have to agree to an austerity program.  It is not clear how the contribution levels might change, but for the EFSF to maintain its AAA rating, the contributions from the core AAA countries of Germany and France will likely have to increase.  The deal also lowered interest rates on the Greece’s current rescue loan as well as future bailout loans.  Despite the rally on the news, we are still negative on the situation and believe that further, more permanent measures will eventually have to be put in place.  Worth noting is that the debt maturities of the periphery – at the treasury level alone – total €488B for the rest of 2011.  Basel III moved a step forward last week, as reports revealed that the banking supervision committee agreed on creating an ever-changing list of banks essential to the world’s economy so that they face stiffer capital surcharges. Portugal announced additional budget cuts on Friday that did little to quell markets as spreads widened. The Portuguese Finance Minister told reporters that he intends to wait through March’s EU summits before deciding to accept an EU bailout saying “I don’t think it’s worth suffering in advance.”  ISDA lists a general interest inquiry to the Credit Derivatives Determinations Committee regarding a possible trigger event on Irish CDS with respect to the acceptance of IMF loans submitted Friday.

Asia:  The Nikkei 225 plummeted to its lowest point in two years as the damage due to Japan’s recent earthquake became realized. The Bank of Japan injected ¥15T ($183B) into money markets this morning to maintain financial stability within Japan’s economy, while boosting asset purchasing capability to ¥40T from ¥35T to head off a likely decline in business sentiment. Reports put Japan’s insured earthquake losses at $14.5-35B, excluding tsunami-related losses. As a leading global consumer, Japan’s weakened state will likely affect commodity prices and its main trade partners. Although Australia’s second largest export market is Japan, the Australian press reported that its companies are not exposed to Japan’s recent disaster. Japan’s industrial production grew 1.3% YoY v 2.4% prior in February, showing an already declining economy before the disaster. China’s M2 money supply grew 15.7% YoY v 17.0%E and new Yuan loans totaled 535.6B v 600.0BE, reflecting recent the PBOC’s monetary policy adjustments.

From Brian Yelvington of Knight Capital

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
SashaBelov's picture

World is almost falling apart and ES is down a half percent. Crazy.

xamax's picture

it'e even more crazy if you bear in mind that ES closed +9 on Friday (only market up btw).

I even expect ES to close in green today. I stopped try understand the US market rationally. 


Harlequin001's picture

That was absolutely staggering...

How much would it go up if we had a nuclear war?

Sudden Debt's picture

so true...

we always talk about black swan events....



I even start to think that when they would tell us on television that a asteroid the size of America would hit earth in the next few days that the markets would still go up...


oogs66's picture

Not seeing much in way of details of new Euro plan, but SovX is 10 tighter, greek bonds are 10 tighter and CDS is 85 tighter.  Seems like its pausing here to wait for details, but a big move tighter for the PIIGS.  Worth watching.

disabledvet's picture

the aussie market has responded--negatively.  clearly "we have a Japanese meltdown" going on.  has the American financial system already melted down and is this "the Divine Wind"?  it is a great question and i believe get's to the heart of Zero Hedge itself.  so many geo political events moving simulataneously--clearly if you've simply "thrown risk to the wind" again Wall Street--well, what business does one have even having wealth if all one knows is how to destroy it?

max2205's picture

The downplaying of radiation impact by MSM is irresponsible and shocking

Sudden Debt's picture



Just plug in that AC adapter in you ass and you'll be able to watch television for free!


ps: they'll need to pay a tax on the amount of "radiation/free energy" their glands contain.



Zeilschip's picture

Today's close in N225 is NOT the lowest point in two years. Makes me question the rest of this garbage macro update.

indya's picture

India NSE up 1.6% monday..What are they thinking? All ingredients to rebuild will go from India ? Suckers and scavengers.

jkruffin's picture

Anyone want to bet GM and Ford start trying to pump their crappy business and stocks with PR after PR this week from the Japan crisis? They will make all kinds of wild claims of how well their sales are now that Toyota and Honda will probably take a hit.

American companies love to use other countries' misfortunes to try to boost their scams.

Miles Kendig's picture

A failure to reach a compromise on cuts or even another stopgap bill by then would close nonessential government services.

If the services are non-essential then why start them back up again?

jdh2358's picture

Two months maybe?

alangreedspank's picture


Wow. These people actually want surging prices MEANWHILE a natural catastrophe is unfolding ? Can you say murderers ?