One Minute Macro Update
US: Markets trading slightly off this AM ahead of the housing data for December. The VIX has bounced off its lows from last week and should trend higher in our opinion, the possibility of a stellar 4Q10 GDP number notwithstanding. Preliminary earnings reports seem to illustrate growth, with financials being the only real variables early in the process.
Europe: German and Portuguese auctions overnight were overshadowed by reports that Greece would receive monies from the EFSF to purchase bonds at a discount. The machinations of such a plan lead us to chalk it up to the rumor mill once again. The voluntary nature of open purchases would avoid a CDS trigger (we believe the financial system actually would find a trigger desirable given their hedging participation), but how much could get done in the open market without driving prices up during the program itself? Additionally, Greece would still be left in an untenable position and existing bondholders would be subordinated. Collective action clauses will eventually be necessary in our opinion. El Pais reporting that new capital rules contained in future stress tests could reveal several entities that need to raise capital. Given the disparity in capital raising between US and European banks, we feel that this should be the case broadly within the EMU.
Asia: Chinese Ministry of Finance officials reporting that state owned enterprises earned a CNY 1.99T profit in 2010 (+37.98% YoY). Early media reports suggest that China has no plans to set a broad M2 target for 2011-2015. Nikkei News reporting that Japan's top banks will offer special loans to companies negatively impacted by FX hedging.
From Brian Yelvington of Knight Capital
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