• Markets:
    • USD bounces, EUR drops. GBP continues to fall; AUD remains strong; JPY rallies; pullback in CHF uptrend.
    • Pullback in US equity uptrend; global equities look weaker than US; Treasury bond rally continues.
    • Commodities pull back across the board; oil, natural gas and silver are the biggest fallers. Silver fall started by hike in Comex margins.
    • The most coherent interpretation of these moves is that markets have suddenly focused on the expectation of a global tightening this year, and that has disrupted the flow of money into risk assets. US equities have been helped by a good earnings season, but logically should now fall.
  • Newsflow:
    • RBA, ECB and BoE hold rates; ECB less hawkish than FX markets hoped.
    • Brazilian central bank president says rates will rise as much as necessary to bring inflation to target next year. IMF raises LatAm growth forecasts and warns of overheating.
    • Hawkish comments from PBoC’s Zhou: bank reserve requirements have no absolute ceiling.
    • Euro leaders agree to review Greek package amid chatter (in Bild) about Greek euro exit plans.
    • Details of Portugal’s rescue package come out; include public sector pay freeze, special tax on pensions, de-facto benefit cuts. GDP falls assumed in 2011 and 2012.
    • Australian government to cut unemployment benefits and defence spending — concerned about adding to pressures caused by mining boom.
    • Pakistan reacts with anger to capture of bin Laden — exposure of intelligence weaknesses to India likely the reason. China likely beneficiary of Pakistani frostiness towards the US.
    • Skirmishes on the Thailand-Cambodia border have come to an end.
  • Commodities:
    • Wheat: Drought continues in US, W. Eu., China. This may prevent expected mean-reversion in prices this year.
    • Corn plantings delayed by rains on Northern Plains. 13% planted vs. 40% average.
    • Cocoa: first ship to leave since Ivory Coast export ban lifted reaches Antwerp.
    • Thai sugar and rice production continues to look strong; sugar price consequently falling.
  • Data:
    • US:
      • US data continue to disappoint expectations.
      • Initial claims uptrend continued with a big jump.
      • Non-farm payrolls beat expectations at 244k, a relatively high number. Media report this as good news…
      • … but unemployment rises from 8.8% to 9%. Employment/population ratio remains basically stagnant and average hourly earnings show only limp growth.
      • ISM non-manufacturing PMI has a big drop, to 52.8.
      • Factory orders +3% MOM — very good number.
    • Europe:
      • German factory orders -4% — quite a disappointment — though IP beats expectations.
      • Services PMI fairly strong.
      • Another surprise drop in EU and German retail sales.
    • UK:
      • House prices drop MOM.
      • M4 growth essentially non-existent since end 2009.
This Week
  • Monthly rash of Chinese data (mainly Weds).
  • Trade balances: China, UK, Australia, US.
  • US retail sales and PPI (Thurs) and CPI (Fri).
  • Bernanke testifies (Thurs).
  • UK and Eurozone GDP estimates.
  • USDA World Agricultural Supply and Demand Estimates (WASDE) (Weds).
Next Week
  • TIC report.
  • UK CPI, unemployment, BoE minutes, retail sales.
  • US FOMC minutes, building permits, existing home sales.
  • Japan prelim. GDP, interest rate decision.
  • Eurozone ZEW and Ifo surveys.
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