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CNBC: The Monday Markets CNBC: The Monday Markets Reviewed by magonomics on January 30, 2011 Rating: 5
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CNBC: Violence in Egypt, Volatility Everywhere Else CNBC: Violence in Egypt, Volatility Everywhere Else Reviewed by magonomics on January 30, 2011 Rating: 5
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The Internationalization of the Yuan or the Sino-ification of Hong Kong?

January 30, 2011
One of the fundamental characteristics of the global financial architecture is that the world’s second largest economy maintains a rigidly controlled currency. The concept of currency wars, as initially articulated last year, seemed to have been a criticism of the easy monetary policy of the Federal Reserve, but is being appropriated and used as …
The Internationalization of the Yuan or the Sino-ification of Hong Kong? The Internationalization of the Yuan or the Sino-ification of Hong Kong? Reviewed by Marc Chandler on January 30, 2011 Rating: 5
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Euro Slides on Long Liquidation, ECB Noises

January 28, 2011
Liquidation of the euro is leading the dollar advance today. The pace of the euro's decline seems to confirm what the option pricing had warned of, namely that longs were getting increasingly concerned. The precipitating factor is not clear.
Some are linking the move to social tensions in Egypt. There is talk, unsubstantiated of SNB intervenin…
Euro Slides on Long Liquidation, ECB Noises Euro Slides on Long Liquidation, ECB Noises Reviewed by Marc Chandler on January 28, 2011 Rating: 5
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US Growth Curbed by Huge Swing in Inventories

January 28, 2011
At 3.2% the Q4 US GDP came in a bit lower than expected. Inventories were the main reason for the miss. In terms of inventory, the key is the change in the change. Inventories rose a little more than $7 bln in Q4 after a $121.4 bln rate in Q3. This subtracted 3.7 percentage points from growth--the most since the late 1980s. Final sales, which is G…
US Growth Curbed by Huge Swing in Inventories US Growth Curbed by Huge Swing in Inventories Reviewed by Marc Chandler on January 28, 2011 Rating: 5
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US GDP, Japan, and Observations on Europe

January 28, 2011
The initial release of Q4 US GDP is the main economic highlight left of the week. The consensus is for 3.5%-3.6% print, which would be the fastest growth in about 3 years. The risk is that the market is disappointed, as recent trade and inventory data would have suggested economists should trim their forecasts a bit and yet the consensus does not …
US GDP, Japan, and Observations on Europe US GDP, Japan, and Observations on Europe Reviewed by Marc Chandler on January 28, 2011 Rating: 5
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Switzerland and India, Really...?

January 27, 2011
A number of Indian banks have begun issuing Swiss franc denominated bonds, ostensibly to raise cheap funds and meet the demand in Europe for emerging market debt. Reports suggest that this is the first of such issues in almost a quarter of a century.
While Indian banks seem well capitalized presently, the new international rules will require them …
Switzerland and India, Really...? Switzerland and India, Really...? Reviewed by Marc Chandler on January 27, 2011 Rating: 5
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Euro Outlook

January 27, 2011
The dollar's strong rally in the first week of the year seems like ancient history now, overtaken by the swing in interest rate expectations and sentiment toward European officials ability to get ahead of the curve of market expectations. I am less sanguine about these developments, but see little indication that the pendulum is done swinging.…
Euro Outlook Euro Outlook Reviewed by Marc Chandler on January 27, 2011 Rating: 5
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Today's Outlook

January 27, 2011
There are two noteworthy developments today: S&P cut Japan's sovereign rating one notch to AA-, citing the lack of a coherent fiscal strategy, and the continued heavy tone of the dollar. The S&P downgrade was surprising especially in the timing. The BOJ had increased its growth forecast for the current fiscal year to 3.3% from 2.1% ear…
Today's Outlook Today's Outlook Reviewed by Marc Chandler on January 27, 2011 Rating: 5
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Fed Says Little New

January 26, 2011
The FOMC did what was largely anticipated. Recognizing that consumption has picked up, it slightly upgraded its assessment of the economy.
However,this has been blunted by labor market assessment. In December it has said that the deterioration in the labor market was abating but now says the improvement is not sufficient. This slightly more emphasi…
Fed Says Little New Fed Says Little New Reviewed by Marc Chandler on January 26, 2011 Rating: 5
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UK Surprises Again

January 26, 2011
For the second consecutive session, the UK has surprised the market. The impact of yesterday's shocking 0.5% Q4 contraction has been blunted by the unexpected BOE vote 7-2 in favor of steady interest rate policy, as the newest member (Weale) joined Sentance's dissent for a 25 bp rate hike. Given that the MPC would not have known that the e…
UK Surprises Again UK Surprises Again Reviewed by Marc Chandler on January 26, 2011 Rating: 5
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Bloomberg Pannel: German View of European Debt Bloomberg Pannel: German View of European Debt Reviewed by magonomics on January 25, 2011 Rating: 5
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Sterling Shocked

January 25, 2011
The UK surprised the markets by reporting that Q4 10 GDP did not expand slowly as the consensus expected, but actually contracted by 0.5%. The economy last contracted in Q3 09. A full breakdown of the report is not made available until the next report in late February. However, the preliminary numbers suggest that the service sector contracted 0.5…
Sterling Shocked Sterling Shocked Reviewed by Marc Chandler on January 25, 2011 Rating: 5
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EFSF and Euro

January 24, 2011
The European Financial Stability Fund (EFSF) is planning its first issue this week. Talk was of a 3-5 bln euros of a 5-year issue priced 8-10 bp on top of swap rates. This would imply a yield of about 2.85% compared to 2.32% German 5-year yield. The EFSF bonds are expected to be priced tomorrow. As was the case of the EFSM bonds sold earlier this …
EFSF and Euro EFSF and Euro Reviewed by Marc Chandler on January 24, 2011 Rating: 5
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Monday Market Forces

January 24, 2011
The tick up in the flash euro zone composite PMI to 56.3 from 55.5 in December has not done the euro any favors with new session lows being recorded in quiet late morning turnover in London. We have emphasized in explaining the euro's recovery over the past two week to shifting interest rate expectations. Since the ECB meeting a number of ECB …
Monday Market Forces Monday Market Forces Reviewed by Marc Chandler on January 24, 2011 Rating: 5
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Chinia Speculation

January 21, 2011
Speculation that China will tighten monetary policy this weekend is likely to prove for nought. The focus may already be shifting to next week, ahead of the Lunar New Year celebration. We have suggested that medium term traders need not get so caught up in the guess work of what the PBOC will move and focus instead on the fact that more tightening…
Chinia Speculation Chinia Speculation Reviewed by Marc Chandler on January 21, 2011 Rating: 5
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Thoughts on the Evolution of the Foreign Exchange Market

January 21, 2011
The Bank for International Settlements, set up after WWI to collect war reparations from Germany, who at the end of last year made its last payment, organizes a global survey every three years, conducted by central banks, to assess the parameters of the foreign exchange market, such as turnover, geographic distribution, and instruments.
The prelim…
Thoughts on the Evolution of the Foreign Exchange Market Thoughts on the Evolution of the Foreign Exchange Market Reviewed by Marc Chandler on January 21, 2011 Rating: 5
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Euro Firm, Consolidiative Tone Elsewhere

January 21, 2011
The euro made new highs since late November today. Investors have shrugged off the latest comments from Fitch that outlined potential triggers to credit downgrades of the periphery. In fact this has been a good week for peripheral bonds. Ten year yields have fallen 16-25 bp in Greece, Portugal and Spain. Ireland is the exception as its 10-year yie…
Euro Firm, Consolidiative Tone Elsewhere Euro Firm, Consolidiative Tone Elsewhere Reviewed by Marc Chandler on January 21, 2011 Rating: 5
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Currency Market Update

January 20, 2011
The foreign exchange market appears to have entered a consolidative phase as it waits for fresh incentives. Slightly firmer short term rates in the euro zone and UK appear to be helping cap the US dollar, while ongoing concerns about the European debt crisis and the potential stagflationary conditions in the UK deter enthusiastic buying for the eu…
Currency Market Update Currency Market Update Reviewed by Marc Chandler on January 20, 2011 Rating: 5
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Some Thoughts on Tunisia's Implications for Investors

January 19, 2011
Through the Middle East, Tunisia's recent experience is prompting policy responses. Officials seem concerned that the ease at which the Tunisia's government was toppled could embolden the disenchanted elsewhere. High food prices and mostly soft growth prospects leave many countries vulnerable, especially non-oil producing Arab countries.
Some Thoughts on Tunisia's Implications for Investors Some Thoughts on Tunisia's Implications for Investors Reviewed by Marc Chandler on January 19, 2011 Rating: 5
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Confused? What to Watch

January 19, 2011
The focus of the market has shifted from the euro zone debt crisis, which seemed to have helped lift the dollar in the first week of the New Year to the shifting interest rate expectations, especially in the euro zone and UK.
This has clear implications for market participants. Watching 10-year bond yields and/or credit default swaps may not impor…
Confused? What to Watch Confused? What to Watch Reviewed by Marc Chandler on January 19, 2011 Rating: 5
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Dollar Remains Soft, Recovery Looming (?)

January 19, 2011
The shift in interest rate expectations in the euro zone and UK continues to be a dominant force in the foreign exchange market. The euro poked briefly through the $1.35 level for the first time late November. Sterling is trying to extend its advancing streak to the ninth consecutive session and remains near yesterday's highs, which was its be…
Dollar Remains Soft, Recovery Looming (?) Dollar Remains Soft, Recovery Looming (?) Reviewed by Marc Chandler on January 19, 2011 Rating: 5
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ECB Officials Soft Pedal Trichet's Hawkishness

January 18, 2011
Market participants are not the only ones surprised by the seemingly hawkishness of ECB President Trichet's comments at last week's press conference. ECB officials themselves seem surprised and several have moved to contain the collateral damage. ECB's Nowotny is the most recent. Of course in diplomatic-speak, it is not that Trichet mi…
ECB Officials Soft Pedal Trichet's Hawkishness ECB Officials Soft Pedal Trichet's Hawkishness Reviewed by Marc Chandler on January 18, 2011 Rating: 5
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TIC Data: Foreigners Large Buyers of US Assets after QEII

January 18, 2011
Foreign investors stepped up their purchases of US assets in November after FOMC decided to resume its Treasury purchases. Foreign investors bought a net of $85 bln of US equities, notes and bonds after an upward revised $29 bln in Oct. The Nov purchases were the most in a few months (Aug). Perhaps related to QEII, foreign investors were net selle…
TIC Data: Foreigners Large Buyers of US Assets after QEII TIC Data: Foreigners Large Buyers of US Assets after QEII Reviewed by Marc Chandler on January 18, 2011 Rating: 5
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Shifting Rate Expectation

January 18, 2011
What began off last week as a correction to the dollar's surge in the first days of the new year morphed into something much more last week and has continued into this week's activity. There has been a profound shift in interest rate expectations. Seemingly hawkish comments from ECB President Trichet as December euro zone CPI was confirmed…
Shifting Rate Expectation Shifting Rate Expectation Reviewed by Marc Chandler on January 18, 2011 Rating: 5
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Yankee Weight on the Dollar

January 17, 2011
Foreign businesses, especially financial firms, are issuing a great deal of debt in the US and as they convert out of dollars this seems to be one of the factors that may be weighing on it.
In the first two weeks of the news years, foreign financial firms, notably European banks and insurance companies, have raised $36.4 bln in the US. This is the…
Yankee Weight on the Dollar Yankee Weight on the Dollar Reviewed by Marc Chandler on January 17, 2011 Rating: 5
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Key Points For MLK Holiday Markets

January 17, 2011
The US dollar is mixed against the major currencies, but the key development is the sharp drop in the euro as last week's lofty expectations are scaled back. German officials still seem to be balking pressure to increase the EFSF. The euro's decline brought it within a whisker of the 38.2% retracement of last week's gains (found near $…
Key Points For MLK Holiday Markets Key Points For MLK Holiday Markets Reviewed by Marc Chandler on January 17, 2011 Rating: 5
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Bloomberg: Euro May Weaken to $1.18 Bloomberg: Euro May Weaken to $1.18 Reviewed by magonomics on January 15, 2011 Rating: 5
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Market Watch: Global Currency Plays Market Watch: Global Currency Plays Reviewed by magonomics on January 14, 2011 Rating: 5
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Euro and Swiss franc Outlook

January 13, 2011
As the European debt crisis reemerged as a central driver of the foreign exchange market in early November 2010, the euro slumped more than 10% against the Swiss franc. Given the size of the Swiss capital markets, global funds managers typically do not have large exposure in Switzerland. Many of the world class Swiss companies have duel listings a…
Euro and Swiss franc Outlook Euro and Swiss franc Outlook Reviewed by Marc Chandler on January 13, 2011 Rating: 5
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Europe: Lacking Proper Diagnosis, Cure Remains Elusive

January 09, 2011
Europe’s debt crisis remains among the most important factors in the global capital markets. By some market-based measures, like interest rate spreads and credit default swap prices, the crisis is more acute now than it was before an assistance package was belatedly cobbled together for Greece and the establishment of the temporary European Financ…
Europe: Lacking Proper Diagnosis, Cure Remains Elusive Europe: Lacking Proper Diagnosis, Cure Remains Elusive Reviewed by Marc Chandler on January 09, 2011 Rating: 5
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Investment Flows Week One 2011

January 07, 2011
At the end of Dec ICI reported the first inflow into US equity funds in several months. EPFR is reporting that flows into US equities may have continued into the week ending Jan 5. It reported $3.75 bln went into US equity funds. This is greater than the $3.38 bln that EPFR reports went into emerging market equities. Another $385 mln it says went …
Investment Flows Week One 2011 Investment Flows Week One 2011 Reviewed by Marc Chandler on January 07, 2011 Rating: 5
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Be Prepared to Buy into Potential Dollar Decline

January 07, 2011
There has been an obvious build up of expectations about the US jobs report today. The dramatic jump in the ADP estimate spark a large upward revision in expectations even though the short-comings of its estimate and its track record are well known. In part the optimism also reflects the recent string of data that has convinced even many of the cy…
Be Prepared to Buy into Potential Dollar Decline Be Prepared to Buy into Potential Dollar Decline Reviewed by Marc Chandler on January 07, 2011 Rating: 5
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Dow Jones Newswire: Annual Market Forecast Dow Jones Newswire: Annual Market Forecast Reviewed by magonomics on January 06, 2011 Rating: 5
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Belgium: From the Frying Pan into the Fire

January 06, 2011
Belgium's political crisis is deepening and since it is part of the euro zone, it is being reflected in the Belgian debt market. The 10-year bond yield is up 10 bp today to above 4% and the 2-year yield is up 4 bp. Late yesterday the seven parties failed to resolve their differences and put in a new government. Recall that last month, S&P …
Belgium: From the Frying Pan into the Fire Belgium: From the Frying Pan into the Fire Reviewed by Marc Chandler on January 06, 2011 Rating: 5
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Beware of Buy the Rumor Sell the Fact

January 06, 2011
The price action this week underscores our view that participants have unwound year-end developments. The euro has returned to back to the 200-day moving average it had been toying with until late Dec.
Perhaps even more illustrative of this point is that the weakest G10 currency in the last two weeks of December was sterling, which has been best p…
Beware of Buy the Rumor Sell the Fact Beware of Buy the Rumor Sell the Fact Reviewed by Marc Chandler on January 06, 2011 Rating: 5
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Dollar Bulls Return from New Years

January 05, 2011
There appear to be three main drivers in the foreign exchange market today. First, the failure of the euro yesterday near the upper end of its recent range is both the cause and effect of dealers expressing bearish sentiment by re-establishing short positions squeezed out in the thin holiday markets.
The convincing break of the $1.3250 area would …
Dollar Bulls Return from New Years Dollar Bulls Return from New Years Reviewed by Marc Chandler on January 05, 2011 Rating: 5
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Currencies and Commodities

January 04, 2011
One of the market developments that is capturing the imagination (and wallets) of investors is the rally in commodities. As an example, since late Aug '10, when Fed Chairman Bernanke seemed to signal QEII and US economic data began improving more noticeably, the CRB index has rallied about 30%. Roughly a third of the gain was recorded since la…
Currencies and Commodities Currencies and Commodities Reviewed by Marc Chandler on January 04, 2011 Rating: 5
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The Pound is Sterling, Aussie's Shine Tarnished

January 04, 2011
The value-added tax is set to rise in a handful of European countries this year, with the UK's 2.5 percentage point rise (to 20%) is the largest followed by Portugal's 2 percentage point hike (to 23%). Slovakia , Poland and Latvia have 1 point hikes (20%, 23% and 22% respectively). The UK's Telegraph reports that retailers may raise pr…
The Pound is Sterling, Aussie's Shine Tarnished The Pound is Sterling, Aussie's Shine Tarnished Reviewed by Marc Chandler on January 04, 2011 Rating: 5
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Hungary: EU Presidency, but Full of Controversy

January 03, 2011
Hungary assumes the rotating EU presidency for the first half of 2011. Yet its is mired in controversy, but with the government enjoying a 2/3 majority in parliament, there more pressure is likely to have to be brought to bear on Prime Minister Orban if Hungary is going to adjust its positions.
The controversy is at least threefold. First, the med…
Hungary: EU Presidency, but Full of Controversy Hungary: EU Presidency, but Full of Controversy Reviewed by Marc Chandler on January 03, 2011 Rating: 5
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Four Themes To Start the New Year

January 03, 2011
In still holiday-thin markets, the US dollar has started the New Year off on a firm note, recovering a good part of the slide recorded last week. There a 4 themes that I expect to dominate investment considerations in the coming weeks. They are:
1. The US economy appeared to accelerate in Q4, maybe toward double the 1.7% annualized pace seen in Q2 …
Four Themes To Start the New Year Four Themes To Start the New Year Reviewed by Marc Chandler on January 03, 2011 Rating: 5
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