Australia

The downside technical correction in the dollar that we have been anticipating appears to have begun against most of the major currencies.  The drift lower against the yen over the past month has ended, and although we are skpetical of the impact of the stimulative monetary and fiscal policies in Japan, technically it is difficult to resist the momentum for additional yen weakness.  

The big driver of market declines Friday was led by the Non-Farm Payrolls report. The jobs data was a dreadful miss which leads to the major “disconnect” we’ve been seeing between stock prices and overall economic data which we posted just last week. This is the nagging and confounding reality of the QE and ZIRP grand experiment for many investors.

• George Soros: 'What Japan is doing is actually quite dangerous because" (BBG)
• North Korea lacks means for nuclear strike on U.S., experts say (Reuters)
• Yellen latest to hint about slowing of QE3 (FT)
• Hollande approval rating hits new low (FT)
• Hollande Dismisses Reshuffle as Crisis Hits Popularity (BBG)
• Japan Upper house approves full 5 year term for BOJ gov. Kuroda (BBG)
• US: Plan to Cap Tax Breaks Is Gaining Steam (WSJ)
• BOE Says Investors May Be Taking ‘Too Rosy’ a View of Stress (BBG)
• Kiwis Say ‘Ni Hao’ as China Ties Trump Australia Sales (BBG)
• Obama Avoids Trading Threats With North Korea’s Kim (BBG)

Whenever discussion over North Korea arises in Western circles, it always seems to be accompanied by a strange mixture of sensationalism and indifference. The mainstream media consistently presents the communist nation as an immediate threat to U.S. national security, conjuring an endless number of hypothetical scenarios as to how they could join forces with Al-Qaeda and attack with a terroristic strategy. In the midst of the latest tensions with the North Koreans, I have found that most people are barely tracking developments and that, when confronted by the idea of war, they shrug it off as if it is a laughable concept. “Surely” they claim, “The North is just posturing as they always have," creating a social and political atmosphere surrounding our relations with the Asian nation that places both sides of the Pacific in great danger. The skeptics argue that we will never get to this point, though, because North Korea has brandished and blustered many times before, all resulting in nothing. We see recent events being far different and more urgent than in the past. All that is needed to instigate an event on the Korean Peninsula are tightened sanctions.

• Cyprus leader invites family firm probe (FT)
• How the Fed fueled an explosion in subprime auto loans (Reuters)
• Wal-Mart Customers Complain Bare Shelves Are Widespread (BBG)
• JC Penney CEO gets no bonus, stock award after dismal year (Reuters)
• New Bird Flu Virus Kills 2 in China, Sparking WHO Probe (BBG)
• Algorithms Play Matchmaker to Fight 7.7% U.S. Unemployment (BBG)
• Fed hawk Lacker and dove Evans face off over inflation (Reuters)
• Infamous silver market "cornerer" WH Hunt Becomes Billionaire on Bakken Oil After Bankruptcy (BBG)
• Japan Auto Sales Fall on Subsidy End as Korea Extends Drop (BBG)
• Black Hawks Near North Korea Show Risk in U.S. Command Shift (BBG)
• SEC Embraces Social Media (WSJ)
• Tesla Touts ‘True Out of Pocket’ Financing for Model S (BBG)
• U.K. Banks Try to Dodge Bonus Caps by Defining Risk-Taker (BBG)

Mounds of cold, hard, indisputable evidence not found ANYWHERE else! Damn, you thought Cyprus was newsworthy? Ireland already Troika'd & they're bigger than Cyprus. Depositor recap of banks looks inevitable if this research is right!

Overview of the major central bank meetings and data preview as well as the latest from Cyprus and Italy.

A month ago we pointed out that as a result of Australia's unprecedented reliance on China as a target export market, accounting for nearly 30% of all Australian exports (with the flipside being just as true, as Australia now is the fifth-biggest source of Chinese imports), the two countries may as well be joined at the hip. Over the weekend, Australia appears to have come to the same conclusion, with the Australian reporting that the land down under is set to say goodbye to the world's "reserve currency" in its trade dealings with the world's biggest marginal economic power, China, and will enable the direct convertibility of the Australian dollar into Chinese yuan, without US Dollar intermediation, in the process "slashing costs for thousands of business" and also confirming speculation that China is fully intent on, little by little, chipping away at the dollar's reserve currency status until one day it no longer is.

The smart money is selling Hong Kong and Singapore property. This implies real estate prices may be topping out, with far-reaching consequences.

An oveview of the technical condition of the major currencies.  Offered as a compliment to macro analysis.  

Another non-Russian, non-oligarch, non-billionaire, non-tax evader speaks up...

While the news flow is dominated by Cyprus, it will be important to not lose sight of the developments in Italy, where we will watch the steps taken towards forming a government.  The key release this week is likely to be US consumer confidence. Keep a watchful eye on the health of the consumer in the US after the tax rises in January. So far, household optimism and demand has held up better than expected. The IP data from Taiwan, Singapore, Korea, Thailand, Japan will provide a useful gauge on activity in the region and what it reflects about global activity, however Chinese New Year effects will need to be accounted for in the process.

• Cyprus targets big depositors in bank plan  (FT)
• Merkel Vents Anger at Cyprus Over Bailout Plan as Deadline Looms (BBG)
• Russia rebuffs Cyprus, EU awaits bailout "Plan B" (Reuters)
• Russia Rejects Cyprus Bid for Financial Rescue as Deadline Looms (BBG)
• Cyprus unveils shake-up as the clock ticks (FT)
• Remember Italy? Italy’s stalemate unnerves investors (FT)
• Credit Suisse CEO pay jump to fuel banker bonus debate (Reuters)
• Kuroda Rebuts Reflation Naysayers as BOJ Action Looms (BBG)
• Fund Manager Says 'Whale' Trade Was a Bet (WSJ)
• House averts government shutdown, backs Ryan budget (Reuters)
• Hong Kong Homes Face 20% Price Drop as Banks Raise Rates (BBG)

With some predicting China will import 79% of its oil by 2030, could domestic shale gas extraction help China meet its energy needs? As shale gas fever sweeps through Beijing, analysts are looking at the costs and benefits of extracting what is increasingly a controversial source of energy. But for China, with its growing middle class, the immediate and long-term demand for energy has the potential to spark a revolution in shale gas before sufficient and safe technological know-how and regulations are developed.

Given the relatively calm market reaction to yesterday's vote by the Cyprus Parliament, the UK budget and the US FOMC meeting will be vying for attention today. Got Milk? Milk prices have soared again in New Zealand to distribute the drought induced scarcity. Whole powder milk prices jumped 21% in the latest fortnightly auction, while volumes fell 28%.