Feb 17.
–PPI was higher than expected at 0.8 with Core 0.5. Interest rate futures weakened but a story about Iranian warships in the Suez Canal and a possible Israeli response prompted a treasury bid which didn’t really fade even as the story did. Generally upbeat FOMC minutes were easily absorbed. Curve flatter with reds/golds -4.5 to 281.
–With protests flaring up through Arab states, it might be convenient for the leaders of those countries to divert the focus of the disenchanted towards an enemy other than themselves. For the sake of simplicity that could be Israel or could be the US. It’s possible there could be additional “provocations” to channel negative energy. Reminds me of a saying: “I didn’t say it was your fault, I said I am blaming you”.
–I have seen several pieces citing food prices as a catalyst for the uprisings…that many of these people use over 40% of their budgets for food. Even in the US, where the weighting of food in CPI is less than 7%, people are somewhat unsettled by rapid jumps in prices. With 42 million people (1 in 7) using food stamps and 20% of personal income from govt transfer payments, the situation (even here) could get more unsettled.
–CPI today expected +0.3 with Core +0.1. Job Claims 400k. LEI +0.2 and Philly Fed 21.0 vs 19.3 last.
— (BBG) The Federal Reserve ordered the 19 largest U.S. banks to test their capital levels against a scenario of renewed recession with unemployment rising above 11 percent, said two people with knowledge of the review.
–French Economy Minister Christine Lagarde was quoted earlier this week describing the global imbalances problem in blunt terms. (in front of weekend’s G20 meeting)
“China exports and saves, Europe consumes and the United States prints money and consumes. Is that a balanced model?” she said.
