3SOF

Monday, March 21, 2011...

Overnight Developments

•Global stocks are trading higher with the European Euro Stoxx 50 index up +1.73% and June S&Ps up +14.50 points. The dollar and Treasuries are weaker and most commodities are higher after Japanese Prime Minister Kan said progress is being made in restoring power to 2 reactors at the Fukushima Dai-Ichi power plant and as workers continue to spray water on reactor buildings, preventing fuel rods from overheating and causing further radiation leaks. Crude oil is up nearly $2 a barrel after the US, UK and France attacked military targets in Libya, effectively grounding Mummar Qaddafi's air force. Increased M&A activity is also giving a lift to equity prices after Deutsche Telekom AG jumped 14% after AT&T agreed to buy T-Mobile USA from the German phone company for about $39 billion. The acquisition is the largest in the wireless industry since 2004 and would push AT&T past Verizon Wireless to become the biggest mobile-phone company in America.



•The Asian stock markets today closed mostly higher with Japan closed for holiday, Hong Kong +1.73%, China -0.27%, Taiwan +0.87%, Australia +0.35%, Singapore +1.63%, South Korea +0.95%, India -0.22%. Asia-Pacific stocks closed mostly higher today as Japan made progress in tackling its nuclear crisis and after Sony and Nissan Motor said they are prepared to resume production at some factories in Japan that had been halted after Japan's quake crisis forced then to shut some plants. Many Japanese businesses still face blackouts, transportation slowdowns, shortages of materials and suppliers unable to make shipments. The World Bank says "Japan's GDP growth will be negatively affected through mid-2011," but that "growth should pick up in subsequent quarters as reconstruction efforts, would could last 5 years, accelerate." The World Bank also says that despite the PBOC's actions to raise banks' reserve requirements 6 times since Nov, inflationary pressure in China is unlikely to diminish quickly as higher international commodity prices are still feeding through into the economy. The World Bank estimates Chinese CPI will average 4.7% this year compared with 3.3% in 2010.

Tuesday, March 22, 2011...

Overnight Developments

•               Global stocks are mostly higher with the European Euro Stoxx 50 index up +0.22% and June S&Ps down -0.10 of a point. The dollar and Treasuries retreated, with the dollar index falling to a 1-1/4 year low, as Japan makes progress in averting a nuclear meltdown. In Libya, allied forces are expanding their air strikes to thwart Muammar Qaddafi's fighters, while unrest in Yemen escalated as thousands of people protested on the street against President Ali Abdullah Saleh, who is also facing an internal revolt from army leaders, ministers and diplomats. The British pound surged to a 14-month high against the dollar after Feb UK CPI rose a more-than-expected +4.4% y/y, its fastest pace of increase in 2-1/4 years. The euro climbed to a 4-1/2 month high against the dollar after European officials announced a permanent rescue fund to lend 500 billion euros ($710 billion) from 2013. The 3-month Euribor rate, the rate at which Euro-Zone banks borrow between each other, rose 6 bp to a 1.185%, its highest level in 1-3/4 years as speculation builds about an ECB interest rate hike next month.



•               The Asian stock markets today closed higher with Japan up +4.36%, Hong Kong +0.76%, China +0.49%, Taiwan +0.48%, Australia +0.01%, Singapore +0.64%, South Korea +0.44%, India +0.84%. Asia-Pacific stocks received a boost after Japan made progress in stabilizing reactors at its crippled power plant and as Japanese Prime minister Kan said there was "light at the end of the tunnel" for the country's nuclear crisis. The BOJ pumped an additional 2 trillion yen into the financial system today, bringing its total amount of emergency liquidity pumped into money markets at 40 trillion yen. The Chinese yuan today rose to 6.5552 against the dollar, its highest level since China unified official and market exchange rates in 1993, as speculation mounts that the PBOC will raise interest rates again.

Wednesday, March 23, 2011...

Overnight Developments

•               Global stocks are mostly higher with the European Euro Stoxx 50 index up +0.51% and June S&Ps up +2.50 points. The dollar is little changed while crude and Treasuries are higher with crude oil at a 1-1/2 week high as the alliance enforcing a no-fly zone over Libya prepared to attack Mummar Qaddafi's ground forces. The British pound weakened after the minutes of the Mar 10 BOE monetary policy meeting showed policy makers voted 6-3 to keep interest rates on hold. The euro is little changed after the yield on Ireland's 2-year notes rose 54 bp to a record 10.41%, while the yield on the 10-year Irish note exceeded 10% for the first time since the euro was introduced in 1999. Portuguese bond yields also surged, with Portugal's 5-year bond climbing to a record 8.14% ahead of a parliamentary vote later today against its deficit-cutting plan that may push the country toward a EU bailout. A rally in metals is pushing commodity producers higher as copper climbed to a 2-week high after canceled warrants, or orders to draw metal from LME copper inventories, jumped 45% to 15,525 metric tons, the most in 11 months.



•               The Asian stock markets today closed mixed with Japan down -1.65%, Hong Kong -0.14%, China +1.30%, Taiwan +0.44%, Australia +0.19%, Singapore +0.65%, South Korea -0.14%, India +1.21%. Japan's government estimates the damage from this month's earthquake and tsunami at as much as 25 trillion yen ($309 billion), an amount that might push down Japan's GDP by as much as 2.75 trillion yen for the year starting April 1. The government predicts that Japan's growth will return to normal "very soon" as reconstruction work starts and that rebuilding efforts in fiscal 2011 could push up GDP by 5 trillion yen to 7.75 trillion yen. Japanese stocks closed lower after levels of iodine unsafe for infants were reported in Tokyo tap water as workers struggle to reconnect power to 1 of 4 damaged reactors as the crippled Fukushima Dai-Ichi power plant. Japanese carmakers Toyota and Honda closed lower after they extended production halts due to quake damage. PBOC Deputy Governor Yi Gang said interest rates are at a "comfortable" level and he's "not too worried" by inflation because the pace of price increases will slow in the second half of the year. He predicts "a relatively high CPI of around 5%" until June or July and then increases should slow. The PBOC may be trying to dampen expectations of an imminent rate hike as it assesses the fallout from the Japanese earthquake.

Thursday, March 24, 2011...

Overnight Developments

•               Global stocks are mostly higher with the European Euro Stoxx 50 index up +0.43% and June S&Ps up +6.30 points. The dollar and Treasuries are slightly weaker and commodities are mostly higher with crude oil and copper at 2-week highs. Portugal's borrowing costs rose to the highest since the euro's inception in 1999, but stocks prices are still higher on speculation the European Union will bail out indebted nations. European leaders meet in Brussels today for the start of a 2-day meeting. The extra yield investors demand to hold 10-year Portuguese bonds instead of benchmark German bunds rose 9 bp to a 4-month high of 448 bp, while the Irish-German 10-year spread widened to 609 bp, the most since at least 1991. Citing heightened financial pressure on the country's sovereign rating and "many weak banks," Moody's Investors Service cut 15 of Spain's banks by 2 levels and 5 banks by 3 or 4 levels. Moody's also cut 30 of Spain's smaller banks' senior debt and deposit ratings saying the outlook remains negative. The Mar Euro-Zone PMI composite fell -0.7 to 57.5, slightly weaker than market expectations of -0.4 to 57.8, while the unexpected increase in French business confidence is giving stock prices a lift after the Mar French business confidence indicator rose 3 points to a 3-year high of 109.


•               The Asian stock markets today closed mostly higher with Japan down -0.15%, Hong Kong +0.39%, China -0.42%, Taiwan +0.37%, Australia +1.01%, Singapore +0.69%, South Korea +1.23%, India +0.79%. Engineers at Japan's damaged nuclear plant today resumed work on reconnecting power as Tokyo authorities prepared to hand out bottled water to families after determining that tap water may be unsafe for babies. The CEO of Nissan said about 40 auto-parts makers remain hampered after the Japanese earthquake and Toyota said its North American production might also be disrupted. Efforts to resume production are complicated by the need for hundreds of different components from suppliers whose plants may have been damaged or lack power, as well as disruptions of transportation infrastructure. The PBOC on its website today said that China will make more use of price tools to implement monetary policy and interest rates will be at the "core" of that strategy that moves away from the use of quantitative tools, such as banks' reserve requirement ratios and loan quotas.

Friday, March 25, 2011...

Overnight Developments

•               Global stocks are higher with the European Euro Stoxx 50 index up +0.18% and June S&Ps up +5.40 points. The dollar and Treasuries are little changed but stock markets around the world are higher on better-than-expected earnings from Oracle and Accenture. Portugal continued to rule out a rescue package as the yields on its government bonds rose to a record, while EU leaders bowed to German demands to pare startup capital upfront payments as of 2013 to 16 billion euros ($23 billion), less than the 40 billion euros foreseen in Monday's accord. German Chancellor Merkel argued that Monday's accord had Germany putting up too much capital versus the other European countries. European bank demand for euros continues to be strong after the 3-month Euribor rate climbed to 1.203%, a 1-3/4 year high. The euro was little changed after German business confidence in March fell less than expected. The Mar German IFO business climate fell -0.1 to 111.1, better than expectations of -0.7 to 110.5. Price pressures remain sticky after the Feb German import price index rose +1.1% m/m and +11.9% y/y, stronger than expectations of +0.9% m/m and +11.6% y/y.



•               The Asian stock markets today closed higher with Japan up +1.07%, Hong Kong +1.06%, China +1.33%, Taiwan +0.40%, Australia +0.91%, Singapore +0.91%, South Korea +1.02%, India +2.53%. In a positive sign for Japanese stocks, the Ministry of Finance reported that foreign investors bought 891 billion yen ($11 billion) in Japanese stocks in the week through Mar 18, the most since comparable records began in 2005. Japan's Nikkei 225 Stock Index tumbled 10% last week after the earthquake crisis. Strength in construction firms led a rally in Asian stocks today on optimism demand will grow as Japan rebuilds. A spokesman for Japan's Nuclear and Industrial Safety Agency said one reactor core at the quake-damaged Fukushima Dai-Ichi power plant might be cracked and leaking radiation. Radioactive cesium above the government limit was found yesterday on komatsuna, a leafy vegetable known as Japanese mustard spinach that was harvested in Tokyo's Edogawa ward, 220 kilometers (135 miles) south of the crippled power plant.

Monday, March 28, 2011...

•   Global stocks are mixed with the European Euro Stoxx 50 index up +0.32% and June S&Ps up +2.40 points. Stocks fluctuated on concern over what Japan's nuclear crisis will do to global economic growth. The dollar index climbed to a 1-week high and Treasury prices weakened after St. Louis Fed President Bullard said over the weekend that policy makers should review halting the $600 billion QE2 asset-purchase program before its June completion because the economy may not require that much stimulus. The euro slid to a 1-week low against the dollar after the yield on Portugal's 10-year bond rose to 7.894%, the highest since 1997 when Bloomberg began collecting the data. Also undercutting the euro was the defeat of German Chancellor Merkel's coalition in Sunday's state elections. Merkel's CDU party won 39% of the votes in Baden-Württemberg, its worst result since 1952, while its Free Democratic Party allies won only 5.2%, leaving the 2 parties short of a majori ty rule and marks the end of the CDU's 58-year rule in the state. The British pound tumbled to a 1-3/4 month low against the dollar after the Feb UK Lloyds business barometer, a gauge of sentiment which aims to predict economic developments in the UK four months in advance, fell -2 points to 1, its lowest level in 2 years.


•   The Asian stock markets today closed mostly lower with Japan down -0.60%, Hong Kong -0.39%, China -0.12%, Taiwan -0.67%, Australia -0.19%, Singapore -0.44%, Soth Korea +0.17%, India +0.68%. Japanese stocks closed lower on concern that it may take months to end production halts and electricity shortages from the quake crisis. Tokyo Electric Power, the operator of the crippled Fukushima Dai-Ichi nuclear plant, tumbled 15% to its lowest since 1977 after radiation levels that can prove fatal were detected outside reactor buildings for the first time. Japan's chief government spokesman said a partial meltdown of fuel rods in the No. 2 reactor probably caused a jump in the radioactive readings, which further complicates efforts to contain the worst nuclear disaster since Chernobyl in 1986. Copper prices and Japanese automakers fell on concern Japanese carmakers may have to suspend production at pants in China, potentially curbing copper demand and undercutting automakers' profits. Declines in Japanese exporters were limited after the yen fell to a 1-week low against the dollar.

Tuesday, March 29, 2011...

Overnight Developments

•   Global stocks are mixed with the European Euro Stoxx 50 index down -0.53%, while June S&Ps are up +1.80 points. Treasuries and commodities are lower and the dollar is little changed. Crude oil fell over -$1.00 a barrel as the advance of Libyan rebels against Qaddafi's troops spurs hope the conflict in Africa's third-largest oil producer may end soon. A decline in European bank stocks is dragging the overall market lower on concern European banks need more capital. Treasuries are lower after St. Louis Fed President Bullard, speaking at a forum in Prague, said the Fed might need to tighten monetary policy before the outlook for the global economy clears up later this year. Limiting losses in European stocks was the stronger than expected Feb French consumer spending, which climbed +0.9% m/m and +5.5% y/y, stronger than expectations of +0.5% m/m and +4.8% y/y. German consumer confidence fell less than expected after the Apr German GfK consumer confidence surve y fell -0.1 to 5.9, better than expectations of -0.2 to 5.8.


•   The Asian stock markets today closed mixed with Japan down -0.21%, Hong Kong -0.03%, China -0.99%, Taiwan +0.51%, Australia +0.47%, Singapore -0.01%, South Korea +0.77%, India +0.94%. Japanese stocks declined on concern over whether the country can contain its nuclear crisis and after Goldman Sachs predicted Japan's economy would contract next quarter as it cut its GDP forecast for Japan for the fiscal year starting Apr 1 to 0.7% from 1.3%. Concerns are rising that the increased radioactive pollution found at the crippled Fukushima Dai-Ichi power plant could delay Japan's reconstruction recovery. Limiting declines in Japanese exporters was the decline in the yen to a 1-week low against the dollar, which may help boost exporters' profits.

Wednesday, March 30, 2011...


Overnight Developments

•   Global stocks are higher with the European Euro Stoxx 50 index up +0.71% and June S&Ps up +6.50 points. Stock markets around the world are all higher on speculation that neither the Japanese nuclear crisis nor Middle East turmoil will derail the global economic recovery. The dollar is higher and Treasuries and commodities are mixed. Credit-default swaps insuring Portuguese government debt rose to a record 557 bp as the yield on Portugal's 5-year bond rose to 9% for the first time since the euro was introduced in 1999. The WSJ reported that Portugal might revise official data for a report to be sent to Eurostat, the EU statistics agency, which could show a wider 2010 budget deficit. Barclays Capital speculates that Portugal, which faces total bond redemptions of about 9 billion euros ($12.7 billion) by June, has no more than 5 billion euros in cash, making a bailout a near certainty. Bank of Ireland Plc slumped over 6% amid speculation the government may be forced to take a controlling stake after the results of a third round of stress tests are published tomorrow. Mar Euro-Zone economic confidence fell -0.6 to 107.3, slightly more than expectations of a -0.3 point decline to 107.5.


•   The Asian stock markets today closed mostly higher with Japan up +2.64%, Hong Kong +1.70%, China -0.06%, Taiwan +0.58%, Australia +1.40%, Singapore +1.26%, South Korea +1.03%, India +0.89%. Japan's Nikkei 225 Stock Index rallied to a 2-week high as Japanese companies resumed production following the Mar 11 earthquake and on speculation the economic recovery in the US will boost earnings. An unexpected increase in industrial production also lifted Japanese stocks after Feb Japan industrial production rose +0.4% m/m, stronger than expectations of a -0.1% m/m decline. The fall in the yen to a 2-1/2 week low against the dollar is another positive for Japanese stocks, while the Australian dollar strengthened to $1.0333, the most since it was freely floated in 1983, on prospects that global growth will increase demand for commodities.

Thursday, March 31, 2011...

Overnight Developments

•   Global stocks are mixed with the European Euro Stoxx 50 index down -0,73% and June S&Ps up +0.10 of a point. A weaker dollar has pushed most commodities higher and Treasuries are stronger on concern the European sovereign-debt crisis may worsen. Credit-default swaps on Portuguese government debt rose 13 bp to a record 579 bp while default swaps on Irish government bonds rose 8 bp to a 2-1/2 month high of 633 bp. The 10-year German bund yield climbed to a 14-month high of 3.364% after European inflation accelerated. The Mar Euro-Zone CPI estimate unexpectedly climbed to 2.6% y/y, the fastest pace since Oct 2008. An increase in French producer prices is undercutting bunds as well as Feb French producer prices rose a more than expected +6.3% y/y, its fastest pace in 2-1/2 years. Strength in the German labor market is limiting losses in European stocks as German unemployment fell for the 21st straight month in Mar. The Mar German unemployment change fell a mor e than expected -55,000 to 3.01 million, the lowest level of unemployment since Jun 1992. That helped push the Mar German unemployment rate down -0.2 to 7.1%, its lowest level since records for a reunified Germany began in 1991.


•   The Asian stock markets today closed mostly higher with Japan up +0.48%, Hong Kong +0.32%, China -1.01%, Taiwan +0.43%, Australia +0.33%, Singapore +0.34%, South Korea +0.66%, India +0.80%. Japan's Nikkei 225 Stock Index climbed to a 2-week high on optimism a strengthening recovery in the US will boost Japanese exports. The Mar Nomura/JMMA manufacturing PMI tumbled -6.5 to a 1-3/4 year low of 46.4 as Japan's manufacturing sector contracted following the aftermath of the Mar 11 earthquake. An electricity shortage after the disaster is threatening to exacerbate Japan's post-quake slump even as intact factories move to conserve power. Tokyo Electric Power has begun rolling blackouts in the capital and Toyota Motor said automakers may want to consider taking turns in running assembly lines to save energy, while Tokyo Steel Manufacturing has already shifted production west because of the power disruptions. Goldman Sachs Group today raised Chinese stocks to "overweig ht" from "market weight" saying investors should increase their holdings in Chinese stocks as the government may delay further policy tightening measures given signs inflation and the economy are slowing.

Friday, April 1, 2011...

Overnight Developments

•   Global stocks are mostly higher with the European Euro Stoxx 50 index up +0.81% and June S&Ps up +5.70 points. The dollar is higher and Treasuries are weaker ahead of the US payrolls report for Mar later this morning. Crude oil rose to a 2-1/2 year high of $107.65 a barrel in overnight trade after manufacturing data in China accelerated for the firs time in 4 months. A rally in European bank stocks is leading the overall market higher, with BNP Paribas SA, France's largest bank, up 2.7% and Barclays Plc up 3.7%. Bank of Ireland Plc soared 30% after it outlined plans to avoid majority government control after being ordered to raise 5.2 billion euros following a stress test. An easing of sovereign-debt concerns is also boosting European stocks after credit default swaps to insure Portugal's government debt fell 11 bp to 570; swaps fell 4 bp on Irish debt to 640, declined 5.5 bp on Spanish debt to 229 and slipped 3 bp on Greek debt to 991. The euro weakened af ter the Mar Euro-Zone PMI manufacturing index was unexpectedly revised down -0.2 to 57.5, while manufacturing activity in England fell to its lowest level in 5 months after the Mar UK PMI manufacturing index tumbled -3.8 to 57.1.


•   The Asian stock markets today closed mostly higher with Japan down -0.48%, Hong Kong +1.17%, China +1.53%, Taiwan +0.25%, Australia +0.49%, Singapore +0.47%, South Korea +0.67%, India -0.13%. Japanese stocks closed lower as Mar Japan vehicle sales plunged -37% y/y to 279,389 vehicles, its biggest decline since sales data began in 1980 after last month's earthquake and ensuing nuclear crisis deterred buyers and forced automakers to shut factories. Losses in Japanese stocks were limited however, as the yen fell to a 1-1/2 month low against the dollar. Chinese stocks closed higher and boosted global stocks as well after Chinese manufacturing growth in Mar accelerated for the first time in 4 months when the Mar China PMI manufacturing index rose +1.2 to 53.4, which eases concern that recent monetary tightening by the PBOC may lead to a marked slowdown in the Chinese economy. South Korean stocks finished higher after Mar Korea exports surged +30.3% y/y, which will also ad d pressure on the BOK to raise interest rates further as Mar Korea CPI rose to +4.7% y/y, its highest level in 29 months.

Monday, April 4, 2011...

Overnight Developments

•   Global stocks are mostly higher with the European Euro Stoxx 50 index up +0.16% and June S&Ps up +3.30 points. Treasuries are lower and commodities are higher with crude oil at a 2-1/2 year high above $108.00 a barrel. The euro fell back from a 5-month high against the dollar after European investor confidence fell more than expected from a surge in fuel costs. The Apr Euro-Zone Sentix investor confidence fell -2.9 to a 3-month low of 14.2. M&A activity is lifting European stocks as Vodafone Group Plc agreed to sell its stake in SFR to Vivendi for 7.95 billion euros ($11.3 billion) and Solvay SA agreed to buy chemical maker Rhodia SA for 3.4 billion euros ($4.8 billion). German bund prices fell for an eighth day, their longest streak of declines in almost 5 years, after Feb Euro-Zone producer prices climbed +6.6% y/y, their fastest pace in 2-1/2 years.



•   The Asian stock markets today closed mostly higher with Japan up +0.11%, Hong Kong +1.46%, China and Taiwan closed for Tomb Sweeping Holiday, Australia +0.51%, Singapore +0.65%, South Korea -0.26%, India +1.45%. The plunge in the yen to a 6-month low against the dollar along with a stronger-than-expected US payrolls report on Friday lifted Asian stocks on increased optimism in the economic recovery. South Korea's won rose to a 2-1/2 year high against the dollar as increased confidence in the global economy prompts investors to increase risks as they pump money into emerging markets. In an effort to allow workers in to fix damaged pumps at its crippled Fukushima Dai-Ichi nuclear plant, Tokyo Electric Power (Tepco) said it will dump radioactive water into the sea as it runs out of space to store fluids used to cool the plant's 6 reactors. The Japanese government approved a plan by Tepco to release water with low radioactive contamination into the sea to make room for l iquids with higher radiation levels.

Tuesday, April 5, 2011...

Overnight Developments

•   Global stocks are weaker with the European Euro Stoxx 50 index down -0.08% and June S&Ps down -4.30 points. The dollar is stronger after Fed Chairman Bernanke said at an Atlanta Fed conference last night that inflation must be watched "extremely closely," which fueled speculation that the Fed may tighten monetary policy sooner than previously expected. Stock prices were pressured after China raised its interest rates and after Moody's Investors Service cut Portugal's long-term government bond rating to Baa1 from A3, its second downgrade in the last 3 weeks, saying another downgrade may follow and the winner of Portugal's elections in June will probably tap Europe's bailout fund with "urgency." Credit-default swaps on Portuguese government debt jumped 9 bp to a record 589 bp and the extra yield that investors demand to hold Portuguese bonds instead of benchmark German bunds rose to 531 bp, the most since Bloomberg began tabulating the data i n 1997. The euro remained lower after Feb Euro-Zone retail sales unexpectedly declined -0.1% m/m as high energy costs curbed spending, while ECB Council member Bonello said that risks to the ECB's economic growth projections "are on the downside." On the positive side, the Mar Euro-Zone PMI composite index was revised up +0.1 to 57.6.



•   The Asian stock markets today closed mixed with Japan down -1.06%, Hong Kong, China and Taiwan closed for holiday, Australia +0.27%, Singapore +0.20%, South Korea +0.72%, India -0.08%. China raised interest rates for the fourth time since the global financial crisis in an attempt to restrain inflation and limit the risk of asset bubbles. The PBOC hiked the 1-year lending rate by 25 bp to 6.31% from 6.06%, effective tomorrow, and boosted the 1-year deposit rate to 3.25% from 3.00%. A fall in chipmakers led technology stocks lower in Asia after the Semiconductor Industry Association said the 3-month average for global chip sales fell -1.1% m/m in Feb. Toyota closed down over 3% after it said it may temporarily shutter factories in North America as component supplies are running low after production in Japan was halted in the aftermath of the earthquake, while Sony fell 1.1% after it said it may delay the release of its new Playstation Portable game machine as the earth quake disrupted production. Tokyo Electric Power (Tepco) plunged the daily limit, or 18%, to its lowest price since the company was listed in 1951 as it continues to dump radioactive water into the ocean. Tepco has now lost 83% of its value since the Mar 11 earthquake crippled its Fukushima Dai-Ichi power plant.

Wednesday, April 6, 2011...

Overnight Developments

•   Global stocks are mixed with the European Euro Stoxx 50 index up +0.50% and June S&Ps up +8.90 points. The dollar index slipped to a 1-1/2 week low while precious metals soared, as silver posted a 31-year high and gold climbed to a record. Expectations for an ECB rate hike at tomorrow's monetary policy meeting has boosted the euro to a 14-1/2 month high against the dollar, while the outlook for further emergency stimulus from the BOJ has pushed the yen to a 6-1/4 month low against the dollar. The expected tightening of ECB monetary policy has strengthened the euro's interest rate differentials with the 3-month Euribor rate, the rate at which European banks say they see each other lending in euros for 3 months, increasing for the fourteenth consecutive day as it rose +0.7 bp to a 1-3/4 year high of 1.269%. European stocks received a boost after Feb German factory orders surged +2.4% m/m, nearly 5 times as much as forecast. Limiting stock gains however, was th e unexpected decline in Feb UK industrial production which slipped -1.2% m/m, weaker than expectations of a +0.4% m/m increase.



•   The Asian stock markets today closed mixed with Japan down -0.32%, Hong Kong +0.56%, China +1.17%, Taiwan +1.69%, Australia +0.26%, Singapore +0.75%, South Jorea -0.24%, India -0.38%. Japanese stocks closed slightly lower as the country's industrial output struggles to recover from the quake crisis, although most exporters strengthened as the yen tumbled to a 6-1/4 month low against the dollar. On the positive side, workers at the crippled Fukushima Dai-Ichi nuclear complex finally stopped the flow of radioactive water from flowing into the Pacific Ocean, although highly contaminated water continues to pool around the complex. China's Shanghai Stock Index closed higher despite the PBOC raising interest rates yesterday as speculation mounts that the PBOC may be nearing an end to its rate-tightening cycle.

Thursday, April 7, 2011...

Overnight Developments

•   Global stocks are mixed with the European Euro Stoxx 50 index up +0.57% and June S&Ps up +0.50 of a point. The dollar is higher and Treasuries are weaker while copper rose to a 1-1/2 week high. As expected, the BOE maintained its benchmark interest rate at 0.50% and kept its asset purchase target at 200 billion pounds following the conclusion of its monetary policy meeting. A rally in European bank stocks is leading the market higher after Portugal's government asked for a bailout. According to European officials with knowledge of the situation, Portugal is aiming for a bailout that may be worth as much as 75 billion euros ($107 billion) as record high borrowing costs forced the country to be the third in the Euro-Zone to seek a rescue package. After climbing to a record high of 585 bp on Tuesday, credit-default swaps tied to Portuguese bonds tumbled to 535 bp today. German bunds tumbled on reduced safe-haven demand with the yield on the benchmark 10-year b und climbing to a 1-1/2 year high of 3.46%. Another positive for stocks and a negative for government debt is the strength in German industrial output. Feb German industrial production rose +1.6% m/m and +14.8% y/y, stronger than expectations of +0.5% m/m and +13.2% y/y.



•   The Asian stock markets today closed mixed with Japan up +0.07%, Hong Kong -0.01%, China +0.40%, Taiwan +0.56%, Australia -0.10%, Singapore +0.04%, South Korea -0.32%, India -0.11%. Following the conclusion of its 2-day monetary policy meeting today, the BOJ downgraded their economic assessment of the Japanese economy for the first time since Oct and unveiled a 1 trillion yen ($12 billion) lending facility to help the economy rebuild from last month's earthquake. The BOJ said Japan's economy is under "strong downward pressure" after the earthquake damaged production facilities and weakened financial positions of companies, and pressure will persist "for the time being" before the economy recovers. The Australian dollar climbed to $1.0482, the highest level since being freely floated in 1983, after Australia's unemployment rate fell to a 2-year low of 4.9% in March as employers added 37,800 workers, more than the 24,000 forecast.

Friday, April 8, 2011...

Overnight Developments

•   Global stocks are higher with the European Euro Stoxx 50 index up +0.40% and June S&Ps up +5.50 points. The dollar index slumped to a 16-month low, which has sent commodities soaring, with crude oil at a 2-1/2 year high and gold at a record. Limited damage to Japan from yesterday's 7.1-magnitude temblor along with strength in German exports is lifting stock prices across the globe. The euro climbed to a 14-3/4 month high against the dollar after Feb German exports rose +2.7% m/m, stronger than expectations of +2.0% m/m. The strong economic data along with a rally in equities has pushed the 10-year German bund yield up to a 1-1/2 year high of 3.477%. The British pound surged to a 14-1/2 month high against the dollar after Mar UK PPI output prices rose a larger-than-expected +5.4% y/y, their fastest pace in 29 months.



•   The Asian stock markets today closed mostly higher with Japan up +1.85%, Hong Kong +0.47%, China +0.87%, Taiwan -0.08%, Australia +0.66%, Singapore +0.49%, South Korea +0.21%, India -0.71%. Japanese stocks rose after minimal damage was caused from yesterday's 7.1 magnitude temblor. Toyota closed 1.4% higher after it said it will resume output at its factories in Japan on Apr 18, while shipbuilders and engineering companies rallied on speculation that they may benefit from Japan's rebuilding efforts. China's Shanghai Stock Index rose to a 4-3/4 month high led by gains in mining companies and energy producers, while China's airline stocks rose after China National Radio reported that the airlines will raise fuel surcharges after the government increased the price of jet fuel. According to data from EPFR Global, developing-nation equity funds saw a $5.7 billion inflow in the week ended Apr 6, the biggest increase in nearly 6 months.