One Minute Macro Update

US:  Markets trading with a sour tone this morning, driven once again by macro headlines.  Yesterday’s claims data resumed its dire tone as PPI reflected commodity inflation (the bad kind).  Today will see a slew of data including CPI, retail sales, inventories, industrial production and capacity utilization – the sum of which should signal whether the 4Q10 upswing was inflation/inventory driven or the result of real demand.

Europe:  The back and forth chatter on growing the EFSF continues, with the latest round of noise stating that the facility could be upsized to €1.5T.  Reportedly the further backing for the “shock and awe” fund would feature guarantees, rather than cash assistance.  This reminds us of the Thomas R. Callahan II quote on such features.  Spanish bank ECB borrowings rise to €70B v €64.5B prior.  Eurozone inflation indicating a surge in energy prices with December coming in at 2.2% YoY v 2.2%E.  Core inflation printing at 1.1%, in line with purported low inflation.   EURIBOR tops 100bp as EURIBOR-OIS falls to 31bp.

Asia:  China hike on required reserve ratios spooks equities.  This is the fourth hike in two months.  Wheat production suffering per headlines out of China and Australia.  JPY fiscal hawk Yosano appointed as economic minister, lessening the probability of fiscal stimulus for Japan

From Brian Yelvington of Knight Capital

Comments

[99er]

Simple Thesis: Dollar Up, Equities Down

DX   http://99ercharts.blogspot.com/2011/01/dollar_14.html

ES   http://99ercharts.blogspot.com/2011/01/es_14.html

http://www.zerohedge.com/forum/99er-charts-0

[oogs66]

SOVX is 196 -4      FINS 188 +3   MCDX 226 +6

MAIN is 107 +1.5   IG15 86 +1

XOVER 421 +5       HY15 103 1/8  - 1/4

So Sovereign CDS doing a touch better, cash is mixed but underperforming.  HY cash was stable with continued positive flows.  IG was a touch wider yesterday, and looks like flows are neutral.  Muni's widened significantly yesterday and outflows continue. 

[99er]

Gold

Rounding Top?

http://99ercharts.blogspot.com/2011/01/gold_14.html

http://www.zerohedge.com/forum/99er-charts-0

[FinanceSeer]

One Thought: Caint see the TREES because of the FOREST. The BIG PICTURE helps. Just not in this case. CPI is near 220! Means DEFLATION is essentially here. Most of that uptick in the CPI is coming for gotta haves, ie., GAS, FOOD. However, really, CONSUMERS are NOT spending. They are HOARDING CASH (or at the least: they SHOULD be)!