In This Issue.
* China's manufacturing slowed.
* Draghi's bazooka.
* Moody's cut.
* Canadian retail sales.
And, Now, Today's Pfennig For Your Thoughts!
Short but Sweet today.
Good day. And a Marvelous Monday to you! We just went through our last weekend in February, at the end of this week, we'll be turning the calendar to March! YAHOO! My fave month! Of course, March 1st is not a day that most people are looking forward to, given the ignition date of spending cuts. I almost didn't answer the bell this morning, and it's been iffy since, so, I'll get through this today, and probably go back to sleep! UGH!
The biggest news this past weekend, is that China's Manufacturing Index slowed to 50.4 from 52.3 the previous month. This sent the global growth campers to the higher ground to get out of the muck that this report created. And only for new readers do I have to point out that any sign of a Chinese slowdown weighs heavily on the Aussie dollar (A$). I'm actually surprised at this reading for Chinese manufacturing, the recent trend has been upward, and now the index hovers on the contraction / expansion line.
And. it will bring the rate cut campers back out of the walls, after being sent there last week by Reserve Bank of Australia (RBA) Gov. Stevens comments about rates being good where they are. So, up and down. reminds me of the great Blood, Sweat & Tears song. What goes up, must come down, spinning wheel got to go 'round.
The euro is stronger this morning, but only by a hair. There's a great article on the Bloomberg this morning regarding European Central Bank (ECB) President, Draghi's "unfired bond buying bazooka slays yields". The article talks about how ever since Draghi, announced that he would be buying bonds if necessary, that bond yields in the Eurozone have rallied are the best performers among 26 developed markets tracked by Bloomberg. And I loved this quote from former U.S. Treasury Sec. Paulson. "if you have a squirt gun in your pocket you may have to take it out. If you have a bazooka in your pocket and people know you have a bazooka, you may never have to take it out."
And so it is with Draghi's bazooka. Let's hope he can keep it in his pocket for a long time! ''
Well, late last Friday afternoon, Moody's threw a cat among the pigeons by announcing a credit rating cut for the U.K. from Aa1 to Aaa. Still investment grade, so no worries there, but it might cause some holders of U.K. bonds to have to bail because of the rate cut. The British pound sterling was sent to the woodshed, and has been there since, falling all the way to 1.5140, from the 1.5255 it held on Thursday.
I'm not surprised by this move from Moody's, the U.K. is a mess folks, and the thing that I've been reminding you about for about 4 years now, is that whatever happens in the U.K. seems to be about 6 months ahead of hitting the U.S. shores.. Unsustainable debt loads just keep haunting the U.K. just like they are now doing to Japan, and have been doing to the U.S. I know that former Bank of Canada Gov. Mark Carney has hung his shingle at the Bank of England (BOE) and he is seen as somewhat of a savior. I think Carney has his hands full here, folks. I doubt he'll be able to make a difference overnight or even within a year or two.
Speaking of Japan. The Japanese yen has gotten back on the slippery slope, after spending a day or two last week living in the past. It looks like they have someone (Kuroda) picked out to run the Bank of Japan (BOJ) One of Kuroda's first announcements will probably be the removal of the BOJ's tightening bias. That's almost laughable! The BOJ had a tightening bias? Who knew? Oh, well. deflation is a real problem in Japan, and one that won't go away by scaring it with a tightening bias!
On Friday, Canada posted more weak data. The good times appear to be pushed to the back seat right now in Canada. (Hey! Carney hasn't been gone that long, so much for his reputation!) Canadian Retail Sales for December (that's not a good sign, given the Christmas shopping period) fell 2.1% from November and marked the largest drop in nearly three years. If we sprinkle in the fact January inflation fell to levels that we haven't seen since 2009, the chances of a rate hike at some point this year have all but floated away.
Then there was this. After four years of buying bonds and holding short-term interest rates at or close to zero, central banks of developed countries are taking a different direction to stimulate their economies, according to The Economist. "The central banks of America, Britain and Japan are experimenting with a shift in approach: coupling monetary action with commitments designed to alter the public's expectations of interest rates, inflation and the economy," the magazine notes.
Currencies today 2/25/13. American Style: A$ $1.0314, kiwi .8404, C$ .9781, euro 1.3300, sterling 1.5139, Swiss $1.0819, . European Style: rand 8.8374, krone 5.6148, SEK 6.3653, forint 220.49, zloty 3.1193, koruna 19.1777, RUB 30.2510, yen 93.98, sing 1.2369, HKD 7.7564, INR 53.8762, China 6.2334, pesos 12.6590, BRL 1.9658, Dollar Index 81.11, Oil $94.16, 10-year 1.98%, Silver $29.15, and Gold. $1,592.75. and to take a peek at the U.S. Debt Clock, click here: http://www.usdebtclock.org/index.html
That's it for today.Chuck tried to push through, but he was walking out as I was walking in this morning so he asked me to go ahead and take care of sending the Pfennig today. As he mentioned at the beginning, he was feeling under the weather, so it sounds like some rest is on the agenda as soon as he gets home. I apologize for the abbreviated version of the Pfennig today, but Chuck did stick it out and give us these words of wisdom for us to read this morning. On that note, I'm running behind, so until next time, Have a Great Day!!
Assistant Vice President
EverBank World Markets
02-25-2013 11:07 AM