China May Start Easing Monetary Policy, BNP Says (Update1) - Bloomberg.com

Somebody up there likes us.

How else can you explain the incompetent reaction of the Middle Kingdom's monetary authorities?

I just wish there was a way to bet on this one.

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San Francisco

China's policy makers may start easing monetary policy in the coming months as bond yields signal that the economy is heading for a "hard landing," BNP Paribas said.

The curve tracking the difference between the yields on 2- and 5-year bonds has "collapsed" in the past 10 days and an inversion may signal a recession in China, BNP strategists Clive McDonnell and Ryan Tsai said in a report today. That outcome would be "unthinkable" for China, they said.

"While the yield curve is telling us that the economy is heading for a hard landing, we believe there is no appetite among policy makers for such an outcome," the strategists wrote.

http://www.bloomberg.com/apps/news?pid=20601068&sid=a7DUAI.vbwAo

U.K. Trade Deficit Widened in March on Import Jump (Update2) - Bloomberg.com

The pound broke major support today.

It looks like a sell, next time it reaches resistance.

Buy the Euro and sell the Pound.

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San Francisco

The U.K. trade deficit widened in March as imports jumped the most in six months, led by demand for goods from cars to engineering equipment.

The goods-trade gap was 7.5 billion pounds ($11.1 billion), compared with 6.3 billion pounds in February, the Office for National Statistics said today in London. The median of 13 forecasts in a Bloomberg News survey was for a reading of 6.4 billion pounds. Imports jumped 5.2 percent to an 18-month high, outpacing a 1 percent increase in exports.

The Bank of England is counting on a weak pound to boost exports and support economic growth it helped manufacturing jump the most since 2002 last month. The sovereign debt crisis in Europe has darkened the outlook for U.K. exporters at a time when domestic demand may come under pressure from measures to tackle the public finances.

http://www.bloomberg.com/apps/news?pid=20601068&sid=a8mUMTwqQr68

U.K. Trade Deficit Widened in March on Import Jump (Update2) - Bloomberg.com

The pound has broken major support.

It looks like a sell next time it pushes up to resistance.

There's just too much money in the British system.

Buy the Euro and sell the Pound.

* * * * * J B K * * * * *

San Francisco

The U.K. trade deficit widened in March as imports jumped the most in six months, led by demand for goods from cars to engineering equipment.

The goods-trade gap was 7.5 billion pounds ($11.1 billion), compared with 6.3 billion pounds in February, the Office for National Statistics said today in London. The median of 13 forecasts in a Bloomberg News survey was for a reading of 6.4 billion pounds. Imports jumped 5.2 percent to an 18-month high, outpacing a 1 percent increase in exports.

The Bank of England is counting on a weak pound to boost exports and support economic growth it helped manufacturing jump the most since 2002 last month. The sovereign debt crisis in Europe has darkened the outlook for U.K. exporters at a time when domestic demand may come under pressure from measures to tackle the public finances.

http://www.bloomberg.com/apps/news?pid=20601068&sid=a8mUMTwqQr68

Gold hits fresh record on inflation fears FT.com / Commodities

Inflation is coming, and most of these dinosaurs think it's the light at the end of the tunnel.

It's not. It's the biggest Armageddon they can imagine.

When the Bond contract hits par, remember where you heard it first.

* * * * * J B K * * * * *

San Francisco

Gold prices continued to set fresh highs on Wednesday, as fears about rising inflation kept the yellow metal in demand.

After overtaking its December high of $1,226.10 an ounce on Tuesday, gold reached a fresh peak of $1,243.90 in early European trade.

Gold bugs have been snapping up coins, particularly in Germany and Switzerland, amid fears over the potential inflationary impact of the European Central Bank's decision to buy eurozone government bonds to tackle the region's debt crisis.

Edel Tully, precious metals strategist at UBS in London, said that the €750bn eurozone rescue package agreed on Sunday night had done little to slow demand for gold. "The continuation of this heightened appetite after the bail-out was announced shows that these fears have not been allayed."

http://www.ft.com/cms/s/0/1a701bcc-5d9f-11df-b4fc-00144feab49a.html

U.S. Economy: Trade Gap Widens in Sign of Global Growth Rebound - Bloomberg.com

Just wait till the dollar tanks and US exports get cheaper.

These deficits will be a thing of the past.

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San Francisco

The trade deficit in the U.S. widened in March to the highest level in more than a year as imports climbed faster than exports, adding to evidence of the global recovery from the worst recession in the post-World War II era.

The gap grew 2.5 percent to $40.4 billion, in line with the median forecast in a Bloomberg News survey, Commerce Department figures showed today in Washington. The value of goods sold overseas and those purchased abroad, led by a surge in oil demand, rose to the highest levels since October 2008.

A rebounding American consumer, combined with business spending on equipment and inventories, means imports may keep growing. Exports will probably also improve as expanding economies in Asia and Latin America, which are giving companies such as Cummins Inc. and Dow Chemical Co. a lift, counter any drag from Europe as the debt crisis hurts the euro.

http://www.bloomberg.com/apps/news?pid=20601068&sid=a0JjDCuBrx3I

Europe’s Economy Grows at Faster Pace Than Forecast (Update2) - Bloomberg.com

All this without added stimulus.

Is the Weimar Republic returning?

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San Francisco

Europe's economy expanded at a faster pace than economists forecast in the first quarter as a global recovery boosted exports, helping the region overcome the Greek fiscal crisis and consumers' reluctance to increase spending.

Gross domestic product in the 16 euro nations rose 0.2 percent from the fourth quarter, when it remained unchanged, the European Union's statistics office in Luxembourg said today. Economists had forecast growth of 0.1 percent, the median of 31 estimates in a Bloomberg survey showed. Industrial production gained 1.3 percent in March from February, when it rose 0.7 percent, a separate report showed.

http://www.bloomberg.com/apps/news?pid=20601068&sid=aNiu1cXXGWqc

ECB risks its reputation and a German backlash over mass bond purchases - Telegraph

This is astonishing.

We are witness to the internal deliberations of the FOMC - Euro style.

I'm still amazed they talked the ECB into this plan. They were surviving fine without any monetary stimulus at all.

Now, it's a competitive devaluation to encourage the export sector.

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San Francisco

The European Central Bank risks irreparable damage to its reputation by agreeing to the mass purchases of southern European bonds in defiance of the German Bundesbank and apparently under orders from EU leaders.

By Ambrose Evans-Pritchard
Published: 5:30AM BST 11 May 2010

Jean-Claude Trichet, the ECB's president, denied there had been any political interference. "We are fiercely and totally independent," he said.

It is clear, however, that the two German members of the ECB's council voted against the move, a revelation that may cause a catastrophic political backlash in Germany.

Axel Weber, ultra-hawkish head of the Bundesbank, told Boersen-Zeitung that the emergency move over the weekend had been a mistake. "The purchase of government bonds poses significant stability risks and that's why I'm critical of this part of the ECB's council's decision, even in this extraordinary situation," he said. The rebuke is devastating. The ECB draws it authority from the legacy and aura of the Bundesbank.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7707775/ECB-risks-its-reputation-and-a-German-backlash-over-mass-bond-purchases.html