This morning the People's Bank of China which is the Chinese central bank announced that they would raise bank requirements by 50 basis points to help try and curb the current inflation problem that is emerging in China. Meanwhile, most economist's had expected the Chinese central bank to actually raise interest rates which would have strengthened the Chinese Yuan. This did not happen and once again the Chinese tell the world that they will do what they feel is good for China and not what Tim Geithner or the U.S. government tell them to do. This action by the Chinese is putting pressure on most commodities stocks this morning. Leading commodity stocks such as Souther Copper Corp.(NYSE:SCCO), and Cliffs Natural Resources Inc.(NYSE:CLF) are trading slightly lower this morning on the news.
The Federal Reserve Bank Chairman Ben Bernanke also made a speech this morning in Germany criticizing the current Chinese currency policy. The Federal Reserve Chairman said, that China's decision to undervalue its currency has hurt the global economic recovery. He also defended his quantitative easing plan which ironically also devalues the U.S Dollar. It looks as if a war of words and policy is brewing. We can only guess why the Federal Reserve Chairman thinks that his policy is so right for the world and everyone else's is wrong or not good for the world?
Next we have the General Motors Co.(NYSE:GM) stock that is now trading near its IPO price. This stock seems to be the biggest pump and dump that I have ever seen with the government being the pumper. If I'm not mistaking, doesn't the U.S. taxpayer already own the automaker. Why on earth would he continue to want to throw good money at a bad and losing investment. The same goes for all of these bank stocks that should have failed and were also bailed out.
Oh, stay tuned and be nimble in this market as it is likely to trade in a yo-yo fashion for years to come. As for today, it is a Friday and rarely do the markets close down much on a Friday.
Chief Market Strategist