China, Japan Do Their Best To Add To The Overnight Multiple Expansion

Tyler Durden's picture

China’s monthly data dump was the main macro update overnight, which however with ongoing mockery of the Chinese data "goalseeking" and distribution methodologies, most recently by the likes of Goldman, UBS and ANZ, had purely political window dressing purposes for the new Chinese politburo. Sure enough, that all the data came precisely Goldilocks +1 was enough to put a smile on everyone's face. To wit - Q4 GDP growth came in just higher than consensus (+7.9%yoy v +7.8%). On a full year basis the economy grew by 7.8%, also a tad above expectations. Then we got industrial production, also just higher than expected (+10.3% v +10.2%) and retail sales - just higher as well (+15.2% v +15.1%). Much more important than meaningless, jiggered numbers, was the announcement from the PBOC that in light of the entire world going "open-ended" on easing, China - which now can't afford to lower rates for fears of rampant inflation together with importing everyone else's hot money - announced it will start short-term liquidity operations as additional tool for controlling liquidity, engaging in a reverse repo on a daily basis, which will have a maturity of less than 7 days. This way the central bank will be able to reacted almost instantly to any inflationary spikes across the economy, as it too has no choice but to ease although not by the conventional inflation targeting methods now used by everyone else.

Overnight, Japan also shared the spotlight as far as market price action is concerned. The Nikkei (+2.9%) aggressively outperformed other Asian bourses helped by earlier headlines that Bank of Japan is preparing to announce additional easing measures at its meeting next week. This of course is not news, however the BOJ has certainly adopted the ECB's posture of talking and talking and talking, knowing well every time there is a flashing red headline, the algos will take the USDJPY higher, and once the actual announcement by the BOJ happens, it will be sell the news. Reuters yesterday reported that the BoJ may pledge open-ended asset buying until 2% inflation target is reached. For the n-th time. Overnight headlines following a three-way meeting between the Finance Minister Aso, the Economy Minister Amari and the BoJ Governor Shirawaka are also adding fuel to the rally.

As Deutsche reports, Japanese media noted that Aso and Shirakawa exchanged views on closer cooperation and have made significant progress in producing a joint policy accordstatement. The statement may be published after the two-day BoJ meeting beginning on Monday. Meanwhile, the government’s economic advisor Mr Hamada, who met with PM Abe today, said that the central bank has no choice but to ease next week. Although Hamada added that USDJPY at 95 or 100 is not  problematic for the Japanese economy he interestingly said that 110 was a level to be concerned about. In overnight trading the USDJPY briefly  breached the 90 level after jumping 2.1% in the last 24 hours.

The bigger problem, as we reported, is that while the USDJPY has reached its preliminary target of 90 in two short months, so has inflation, which for several key products has jumped over 3% in the same period! This will only continue as more and more goods and services prices soar leading to a popular backlash as once more people realize there is no such thing as a free lunch.

More on the market recap from Deustche Bank

Asian markets are trading stronger this morning taking cues from the Chinese data as well as the positive US lead yesterday. The Hang Seng, Shanghai Composite and the KOSPI are all higher by 0.88%, 1.4% and 0.31% respectively. Asian credit markets are also trading firmer with IG bonds opening 1-2bp tighter. The UST 10-year is steady at 1.877% after having moved 6bp higher yesterday following a risk-on move in markets.

Returning briefly to yesterday’s US session, for the first time in a week the S&P 500 started the day on the front foot to rally +0.4% shortly after the opening bell on the back of a strong set of housing and jobless claims data. The index closed 0.56% higher, with just Financials (-0.1%) closing lower on the back of some mixed results from Bank of America and Citigroup.

Taking a slightly closer look at the data, Housing starts rose 12%mom to 954k (vs 851k previous and 890k expected) which our US economists partly attribute to unseasonably warmer weather and Hurricane Sandy. Meanwhile, building permits were little changed on the month (903k vs. 899k previous) suggesting that much of the improvement in housing starts was indeed weather-related. Jobless claims were encouraging, falling 37k to 335k for the week ending January 12th which is the lowest reading since January 19, 2008.

The market looked through a disappointing Philly Fed print though as the index fell to -5.8 for January (vs. 8.1 prior and 5.6 expected due to poor current condition readings. The fiscal cliff uncertainty around year-end may have had an impact but the silver lining was that the 6- month outlook for business activity (+29.2 vs. +23.7) and new orders (+32.5 vs. +28.3) were both higher.

Turning to Europe, German Finance Minister Wolfgang Schaeuble said on Thursday he was very concerned about an expected further easing of monetary policy in Japan. In a speech to the Bundestag, Scheuable said that "When you think of the surplus of liquidity on global financial markets, it is fuelled further by a wrong understanding of central bank policy." (Reuters). Italy’s La Republicca reported that Mario Monti and leader of the Left, Bersani, have reached a deal on an “anti Berlusconi” alliance following the upcoming election. Elsewhere, the Portuguese government said that they have decided to tap the debt markets before the end of February, after a successful bills auction on Wednesday, according to domestic media.

Moving on to the day ahead, Italian industrial orders, UK retail sales will be the main data print in the Eurozone. British PM David Cameron was originally scheduled to make a highly anticipated speech on Europe today but that has been postponed following the tragic events in Algeria last night. Elsewhere in Europe, final campaigning will take place in Germany ahead of state polls in Lower Saxony on the weekend. The data calendar will be light in the US today with the UofM consumer confidence index being the only highlight. Morgan Stanley will report today but all eyes will be on bell-weather General Electric as the company reports its results before the opening bell.

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GetZeeGold's picture



Please excuse our mess......we're expanding.


German Finance Minister Wolfgang Schaeuble said on Thursday he was very concerned about an expected further easing of monetary policy in Japan.


Now you're worried? Like where ya been dude? Yeah it's Japan that's screwed up....we're totally fine over here.

Ghordius's picture

the background of this is that the Japanese want to buy bonds denominated in EUR - and they are the same that got seriously pissed when the Chinese wanted to buy boatloads of Japanese bonds

the Japanese gov wants to sweeten the deal by offering to buy ESM bonds

the point is that both europeans and asians are already thinking about the next possible leg of this adventure - when central banks will be busy buying their currency back by selling foreign FX assets

so having too much of your debt concentrated is a liability, particularly if the holder is a foreign central bank like the BoJ


I find interesting that the author of this article favours further rate cuts everywhere, btw

Josephine29's picture

Here is one way of looking at the plummet in the Yen.

Inflation alert in Japan?


An unusual paragraph heading for a country that is mired in disinflation where the price level has been falling. But a contributor to that has been a rising exchange rate which has now been replaced by a falling one. So if we go back to just over 2 months ago and use the current oil price for Brent Crude Oil of US $111 per barrel we see that it would have cost 8650 Yen then but nearly a round 10000 Yen now. Quite a change in input costs there before we get to other commodity prices. As an aside I would just like to point out the the price of a barrel of oil has not changed much for a while in spite of a vast number of predictions that it will fall.


Another interesting idea in there is that of Japan moving towards being a command economy just like China....

firstdivision's picture

Time to short some UCO

HD's picture

Wow. It's one thing to manipulate in the dark but now every central bank has come out and said openly they will micro manage the market down to the algo nano second.

I'm 99% out the door. Tired of playing.

GetZeeGold's picture



Please come back......we need your money.


We have a toaster with your name on it.

HD's picture

Well, I do need a toaster...

LongSoupLine's picture

Total fucking horse shit. Fuck you Goldman and China.

Non Passaran's picture

The only thing that idiot is worried about is the collapsing German machinery orders.
I love currency wars! Bring it on, bitchez.

p.s. I wanted to post this in reply to GetZeeGold's comment about Schaeuble, below.

youngman's picture

Now the USA car companies are starting to cluck about Japan and the low Yen.........The trade war has begun....I think there is a Movie in the works....CAR WARS....."in a Ford Galaxy far far away....."

GetZeeGold's picture



I think they plan to move the Corvette production line to China next year......not sure if the UAW is also planning to move there.

booboo's picture

"See the USA in your Chevrolet
America is asking you to call
Drive your Chevrolet through the USA
America's the greatest land of all

On a highway, or a road along the levee
Performance is sweeter
Nothing can beat her
Life is completer in a Chevy

So make a date today to see the USA
And see it in your Chevrolet

(Travelin' east, Travelin' west)
(Wherever you go Chevy service is best)
(Southward or north, near place or far)
(There's a Chevrolet dealer for your Chevrolet car)

So make a date today to see the USA
And see it in your Chevrolet

deKevelioc's picture

At the risk of sounding insensitive, but has anyone told you that you don't look paricularly attractive?

youngman's picture

We need some new statistics for car prices...they are going to changing hourly as the trade war starts....the monetary policeies will fluctuate their prices  like gold, oil, and will the prices of cars....CARS...the new commodity.....I am buying Lexus

Poetic injustice's picture

*Krugman voice imitation*

More, print more! More I say! Everybody together!

thismarketisrigged's picture

i hope this all blows up on all of these central banks and we head for a 2008 like recession, or even worse. i do not mind the market being sucessful, but lets be succesful on fundamentals, not quanatative easing by every central bank. its absurd

SmoothCoolSmoke's picture

World economy = joke.