Carlos X. Alexa...'s  Instablog

Something that went by unnoticed, and a reflection of growing frustration within the Eurozone, was the fact that Germany "welcomed" a new political party. According to The Telegraph, Angela Merkel must be upset because she did not need another political obstacle.

A new party led by economists, jurists, and Christian Democrat rebels will kick off this week, calling for the break-up of monetary union before it can do any more damage. "An end to this euro," is the first line on the webpage of Alternative für Deutschland (AfD). "The introduction of the euro has proved to be a fatal mistake, that threatens the welfare of us all. The old parties are used up. They stubbornly refuse to admit their mistakes." They propose German withdrawl from EMU and return to the D-Mark, or a breakaway currency with the Dutch, Austrians, Finns, and like-minded nations. The French are not among them. The borders run along the ancient line of cleavage dividing Latins from Germanic tribes.

In addition, European politicians managed to see something that isn't there, and "France, Italy see leeway on budget rules at EU summit," with "a slightly more growth-friendly interpretation of European Union budget." Interpretation is always the key, isn't it? In Cyprus, "international lenders agreed to a €10bn bailout of Cyprus early on Saturday morning after 10 hours of negotiations, but the deal came only after convincing Nicosia to force depositors in Cypriot banks to contribute €5.8bn to the rescue, a first for any Eurozone bailout," according to the Financial Times. Ouch, and that's a pattern that will repeat itself, feeding my position that we have another 12 years of hardship to go.

The very important news out of the Fed was that "it has approved the capital plans of 14 financial institutions in the Comprehensive Capital Analysis and Review (CCAR). Two other institutions received conditional approval, while the Federal Reserve objected to the plans of two firms." They must give the impression of being busy working at any cost, and the stress tests are as useless as their theories. In closing, Fitch Ratings stated in a report that "the recent recovery in financial market conditions has not been matched by the real economy, so far." Yes, we know, but the markets must rally.

The records continue to be broken, and the S&P is now within spitting distance from its all time high. The trends for all indices are still positive short and long-term. The dollar's advance took a pause and reversed course in the last two days of the week, turning neutral short-term, while holding its long-term positive trend. The euro is now neutral short-term, while keeping its long-term negative bias, and finding the $1.30 level hard to break. The yen kept its negative trends, finding the 1.04 level (June futures) soothing for now. WTI and Brent oil turned short-term positive and neutral respectively, while their long-terms remained unchanged - WTI is negative and Brent neutral. The spread has shrunk from $20 to $16. Gold and silver remain long-term negative, while their short-term trends turned only neutral, despite the significant dollar pullback. Copper is also neutral short-term and negative long-term, with the $3.50 level holding for now. The 10-year Treasury rate declined to 1.99% from 2.05%. The 10-year note and the 30-year are now negative, both short and long-term. Next week we'll get U.S. housing data and Fed decisions, or lack thereof, and global PMIs start to roll in.

(click to enlarge)

The PPI increased 0.7% in February, due to higher gasoline prices that jumped 7.2%. The core reading registered a smaller 0.2% increase. CPI was also up 0.7% for the same reasons, with the core gaining 0.2% as well. The preliminary current account deficit declined to $110.4 billion in Q4-2012 from the revised $112.4 billion in Q3-2012.

The Mortgage Bankers Association's mortgage application activity index decreased 4.7%, resuming the fall. Refinancing decreased 5.0% and home purchases decreased 3.0%. Freddie Mac's average 30-year mortgage jumped to 3.63% from 3.52%, and the 15-year increased to 2.79% from 2.76%. Jobless claims decreased 10,000 to 332,000, and the 4-week moving average decreased 2,750 to 346,750. The number for seasonally adjusted insured unemployment decreased 89,000 to 3,024,000.

The Empire State Manufacturing Survey was little changed in March with a 9.2 reading. New orders and shipments indexes remained positive, but weaker than the previous month. According to the Fed, capacity utilization rose to 79.6% from 79.2%, while industrial production was up 0.7% vs unchanged during the previous month. The Thomson Reuters/University of Michigan's preliminary consumer sentiment dropped like a stone to 71.8 from 77.6 in February, and the media has provided plenty of "intelligent" reasons - cliff, budget, bird migration. After the January number, it was the lowest reading since December 2011.

Eurozone annual inflation was 1.8% in February, down from 2.0% in January, while inflation one year ago was running at 2.7%. The core number was a smaller 1.3%. On a monthly basis, inflation was 0.4% in February. German trade balance showed a surplus of 13.7 billion euros, with exports rising 3.1% and imports up 2.9%. Seasonally adjusted, exports rose 1.4% and imports increased 3.3%, and still healthy for the time being. French industrial production decreased 1.2% on a monthly basis, and, over the last three months, manufacturing output dropped 2.1%. That is not cool.

Japan's core machinery orders dropped an enormous 13.1% in January on a monthly basis from the previous month. On an annual basis, core orders declined 9.7%. Japan's industrial output increased a revised 0.3%, down from the initial 1.0%.