Carlos X. Alexa...'s  Instablog

China continues to capture the misplaced hope of the investment world, and while the Politburo is making inroads to revert to the political ways of yesteryear in an attempt to reverse the increasing erosion of power, the economic malaise continues to be masked, especially by "official" data. But news that China is opening up to foreign investors by relaxing rules, says everything one needs to know.

According to Market News International, "China Nov. Exports, Imports Down Sharply," although the forthcoming December "official" numbers may show something different.

Chinese exports and imports both fell "significantly" in November after rising the previous two months, the official Xinhua News Agency said at the weekend, citing unidentified Ministry of Commerce officials. Overall growth in trade -- combining exports and imports -- is now forecast to rise only 6% y/y this year, far short of the government's 10% target and lower than GDP growth, the officials said, according to XNA. Trade growth rose 7.3% y/y in October, including a 11.6% rise in exports, pushing trade growth for the first ten months of the year to 6.3%. "However, in November, imports and exports have shown significant negative growth, indicating the foundation for a stabilization in trade has not yet solidified," an unidentified Ministry of Commerce official told XNA.

With France now losing its prized "AAA" credit rating, courtesy of Moody's, EU budget talks fell apart and apparently will resume in 2013. The problem here is that the old spending addictions are facing heavy resistance.

"Germany, Britain, Sweden and the Netherlands, all net budget contributors, were pushing for further cuts of between 30-75 billion euros on top of the 80 billion already trimmed from the European Commission's original spending blueprint.

And we continue to learn more about Spain's bad loans, rising to their highest level on record in September. Bad loans increased by over 3 billion euros to 182.3 billion euros, representing 10.7% of total outstanding loans - and we're far from uncovering all unserviceable debt.

But what was really different this past week? U.N. Ambassador Susan Rice finally spoke and the truth wasn't part of the speech.

The short week delivered the bounce, and while we have all indices on a short-term positive trend, only the S&P 500 and Wilshire 5000 managed to move to long-term neutral, with the others still negative. In addition, the 50 point move in 3.5 days for the S&P 500 is pushing the short-term goodwill. On Friday the dollar took a dive, turning short-term negative, and the euro rose 1.2% and is now short-term positive, while virtually pricing perfection in one fell swoop when most were still busy with holiday leftovers. The yen has been in freefall for one week now and is finally poised to deliver a mild pullback or hold steady till the next wave. WTI and Brent are still on opposite sides of the trend from a long-term perspective - negative and positive respectively - while the short-term picture is positive. Gold and silver finally broke out to the upside, but unless the dollar enters a long-term negative trend the precious metals' upside is limited. Copper is now short-term neutral and still long-term negative. The 10-year Treasury rate reversed course and rose to 1.69% from 1.57%. Short-term trends turned neutral for the 10-year note and 30-year bond while their long-term trends remained positive. Next week the talks about Greek debt will continue and we'll get retail figures from Europe. In addition, we'll get the second GDP estimate for the U.S., housing data and personal spending.

Existing homes sales rose 2.1% to a seasonally adjusted annual rate of 4.79 million units in October from a downwardly revised 4.69 million in September. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for November rose an astonishing 5 points to 46, the highest level since 2006 and a reflection of stronger builder confidence.

Housing starts increased 3.6% to a 894,000 annual rate and the fastest pace since July 2008. Building permits declined 2.7% to an annual rate of 866,000. The Mortgage Bankers Association's mortgage activity index decreased 2.2%. The refinance index declined 3%, and the purchase index increased 3%. Freddie Mac's average 30-year mortgage rate dropped to 3.31% from 3.34%, and the 15-year mortgage rate declined to 2.63% from 2.65% - both record lows.

Jobless claims declined 41,000 to 410,000, with the 4-week moving average rising 9,500 to 396,250. The number for insured unemployment declined 30,000 to 3,337,000, and the 4-week moving average increased 19,500 to 3,285,000. UoM final consumer sentiment declined to 82.7 from 84.9.

Eurozone's flash manufacturing PMI rose to 46.2 from 45.4, and the services PMI declined to 45.7 from 46.0, with contraction all around being the main theme, while revisiting the lows set in 2009. Germany's manufacturing rose slightly to 46.8 from 46, and services declined also slightly to 48.0 from 48.4. France's manufacturing rose to 44.7 from 43.7 and services increased to 46.1 from 44.6. The Munich-based Ifo institute reported that its business climate index rose to 101.4 from 100, while the Eurozone consumer confidence dropped to 27, the lowest reading since May 2009.

HSBC's China flash manufacturing PMI rose to 50.4 from 49.5, a thirteenth month high, but barely in positive territory. Foreign direct investment in China dropped 0.2% from one year ago, and the 11th decline in 12 months. FDI inflows in the first 10 months of the year dropped 3.5% to $91.7 billion. Japan continues to be hit by Europe and China, with a trade deficit that widened to 549.0 billion yen. Japanese exports to the world declined 6.5% from a year earlier, the fifth consecutive decline, and after a 10.3% drop in September.