Feb 27. Liquidity
Increased liquidity is once again the theme for the week, month, etc. At the G20 summit this weekend Germany appears to have softened its resistance to increasing the firewall for Europe. Also, the ECB’s LTRO is Wednesday, with estimates generally around 450 bil euro.
–The other big and related theme is the price of oil, with CLJ2 up $1.80 late Friday to 109.63. Business Insider cites a research report from BarCap claiming the run up in crude is not primarily due to the actions of central banks, but more related to increased Asian demand (“The problem with judging the global pace of oil demand growth is that the epicentre of that growth has most definitely moved away from the US to Asia, and China in particular”), and a production fall off in the mideast related to geopolitical tensions. Whatever the reason, it’s clearly having a negative impact. Dow Jones Transport Index rolled over in the beginning of Feb and has been moving lower ever since. Vehicle miles driven is continuing to fall. I don’t know how much I buy into the “it’s not central banks, it’s Asian demand” story, especially since China appears to be weakening. However, maybe Japan is accounting for more oil usage since their nuclear capabilities have been impaired. In any case, gold and copper are both up similar amounts to oil since the beginning of the year arguing for the liquidity angle. One analyst suggests watching “weekly same store retail sales comparisons. They held up well all last year. If their YoY readings start going under +2%, that will be a danger sign.”
–US rates saw muted volume Friday as rates edged higher. Ten year remains just under 2%.
–Stockton CA may declare bankruptcy this week, 13th largest city in California.
