Against the Grain

The nervous nature of the financial markets is seeing minute by minute trading and even that is probably a long term investment. This has been highlighted this week with the Greece story. At the start traders pounded the € as fears the country would drag down the whole EU. Then a German comment that help was on the way saw a stampede higher scattering the shorts before it. That continued till y/day afternoon when Bernanke hinted the Fed might nudge up rates that hurtled the US$ higher and the € lower with all the financial markets clattering along behind. Just after 17:00 more Greek relief and the traders began to storm the € higher. To sum it up order, counter order and disorder making it very difficult for business to plan activity. A good summary of the problems facing countries with fiscal deficits was in the FT 11/02 edition by Niall Ferguson “A Greek crisis is coming to America”, (http://www.ft.com/cms/s/0/f90bca10-1679-11df-bf44-00144feab49a.html?nclick_check=1).

After the London close Wed metals got another boost as Greece bail out trumped Bernanke rate move hint. The charge was again led by cu which jumped US$ 200 from the 17:00 kerb close with heavy volume in Asia (3600 lots) despite Japan on holiday. We read a comment by a Chinese brokerage house cautioning the cu stocks in China are not a high as some are saying. The LME stocks saw a cu inflow (Rott material in and cancelled up) with al outflow. Well never has the premarket paid so much attention to Greece as metals (really only cu others very quiet) key off the US$.

Focus was some Jan China data the CPI rose 1.5% yoy less than expected (Dec 1.9%); the PPI jumped to 4.3% higher than expected (1.7%). Makes you wonder is China bidding the cost of raw materials by competing with itself? Then new bank loans catapulted by RMB 1390 billion (Dec  RMB 380 bill), this highlights a Chinese anomaly the banks are told by the government how much they can lend each year and then rush the loans out early so they cannot be reined back in later. Not quite what Western final authorities would approve of. Finally Jan property prices in the 70 largest cities rose 9.5% yoy. In Australia Jan employment rose by 52.7 k (37.5 k) mostly part time as unemployment fell to 5.3% (5.5%). The Jan German wholesale price index rose 1.3% (+0.2%) yoy +1.9% (+0.2%). By 13:00 the EU had agreed to give its full backing to Greece with no concrete measures because they had not asked for any.

In the US data the weekly initial jobless claims 440 k (483 k). At 15:00 Dec business inventories …% (+0.4%). This afternoon the US$ / metal relationship broke down as the US$ strengthened metals got a shot in the arm trading to new highs on the day with equities. Suggest the jobless data caused the rift, stronger economy good for US$, equities and commodities.