The weekend news was rather sparse as the Greeks got their trust fund check from the overlords in Brussels. The Greeks need to be leery of Eurocrats bearing gifts. The Sunday news shows in the U.S. highlighted the vast chasm between Speaker Boehner and Secretary Geithner. There was finger-pointing all around about as to which group was holding up the negotiations as to affect genuine compromise and a resolution to the fiscal cliff. As the rhetoric heats up, the S&Ps and global stock indices all closed higher on the week, showing that the price action speaks louder than words. The market has fears that failure to resolve the fiscal crisis will result in a new U.S. recession and will also undermine the global economic recovery, but yet the COPPER closed above the 200-day moving average for the first time in many weeks. Other industrial metals also performed well last week making me wonder if all the fiscal cliff rhetoric is missing some larger picture. We will watch to see if the COPPER can sustain its recent strength or whether we are in the midst of a short covering rally.
Posts Tagged ‘Tim Geithner’
This morning the Bank of Canada (BOC) voted to keep rates steady as 1% as Governor Mark Carney voiced concern over the troubling situation in Europe. The BOC noted that weakness in the EUROPEAN ECONOMY could spread as more austerity is applied to the profligate peripheries. The Canadians are in a difficult situation as the growth in household debt is growing because of continued low rates and this is causing angst with economic policy makers. Finance Minister Flaherty noted that the Canadian government may have to find other ways to halt the increase in household borrowing. I am not a fan of Mr. Flaherty but it is nice to see a government actually thinking ahead of the problem and looking for ways to “LEAN AGAINST THE WIND.”
Just when it looked like the risk-on paradigm was gaining some traction, Chancellor Merkel, through her spokesman, Steffen Seibert, said, “…dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won’t be able to be fulfilled.” The global equity markets were experiencing a continued rally from Friday when the Merkel statement was released and the market immediately went into sell mode and risk off. The U.S. equity markets tried to maintain Friday’s sizable rally as the news of CITI and WELLS FARGO earnings provided a momentary boost. Overnight the U.S., markets were supported by the news that KINDER MORGAN was buying the pipeline and energy producer, EL PASO.
In an effort to stay abreast of news and markets while in Boston, the two most interesting items on the global financial stage are causing a push/pull in the market. The Spanish elections certainly impacted the markets. Weakness in the EURO began on Friday as Bloomberg ran a story about the sad state of municipal finances in Spain that would be revealed after the Socialists lost most previously held local governments. It seems that the Spanish authorities have been fudging their local municipal finances and this will put more pressure on Spain to enact austerity budgets even with an unemployment rate above 21%.
Chinese and U.S. officials have been meeting in Washington for the past two days under the aegis of the annual forum of Strategic and Economic Dialogue (SED). All the news releases from these meetings sound so hopeful about increased cooperation between the world powers. The Chinese feed the U.S. policy makers with words of promise about the SINO economy becoming more market-oriented and the American delegation tells the Chinese that they will be fiscally responsible and do all they gain to maintain the value of U.S. paper assets that fill the vaults in Beijing. An hour after the Chinese head home, the financial media will no doubt be hungry for some more morsels of hope. So it goes and it will continue: Both sides pledging fidelity the vibrancy of the global economic order.
As expected, the U.K. and the Trichet-led ECB held rate steady. The surprise was the South Korean Bank raising rates 25 basis points to 2.75 percent. Yet the markets, although purportedly surprised, did very little with the WON. More interesting for the currency markets was Trichet’s statement that the ECB was concerned about inflationary pressures within the EU. This on a day when Greek unemployment rose to more than 13 percent. Mr.Trichet, will you ever learn? The markets have just allowed the EU to phony up the Spanish and Portuguese DEBT auctions and before the DOLLAR can even try to rally, Trichet plays the INFLATION card. Really, with an overall European unemployment rate of 10 percent, do the ECB policy makers not believe in output gaps, and, of course, NAIRU?
Ok.OK. We got it —the FED did not wish to anger Mr.Market so he presided over an 11-1 vote for the further Quantitative Easing by another $600 billion spread throughout the next eight months. It was interesting to see that the DOLLAR rallied at first and that GOLD and other commodities were sold off. The S&Ps and other equities tried to break but they realized that BEN BERNANKE is the greatest thing, well, since SIR ALAN GREENSPAN. It seems that the FED has totally fallen into the trap of perpetuating the wealth effect to keep the economy from falling into a deflationary spiral. No matter how we look at this, the importance of EQUITY market gains is paramount as the FED believes that this is the key to unleashing the “animal spirits” that are necessary for capitalism to thrive.
Yesterday’s release of Chinese trade data was just what Senator Schumer needed to refresh the populist agenda on Reminbi revaluation. Treasury Secretary Tim Geithner made an appearance before the Senate Finance Committee where Schumer exhibited his credentials as a fighter for American jobs. Remember that the senior senator from New York is vying for Senate leader just in case Harry Reid should lose his election in November. Geithner was challenged as to why the Treasury Department did not name China a currency manipulator and even stated that the Treasury maay in fact be contravening U.S. law.
Notes From Underground:Geithner is in China, soft peddling U.S. anger and the economic impact of the European debt crisisMay 23, 2010
Treasury Secretary Tim Geithner and Secretary of State Hillary Clinton have headed to China for scheduled discussions under the aegis of Strategic and Economic Dialogue (SED). Geithner praised China for shifting to a more domestic demand-based economy rather than one based solely on exports. He cited the huge shift in China’s overall trade surplus as China has been importing more goods from its Asian neighbors. Hillary Clinton went to hand out stuffed teddy bears to Chinese children, adding another soft touch to U.S. policy.