Stock Market Strategy: As goes the Chinese equity market so goes the rest of the world equity markets….
China’s interest-rate increase last month may be “the first of several” amid increased concern about lending growth, said Anthony Bolton, who manages the Fidelity China Special Situations Solutions Plc fund.
Credit expansion “is still too high, particularly when one takes all the off-balance sheet and unofficial lending channels into account,” Bolton wrote in a statement with interim results of his 601 million-pound ($964 million) fund listed in London. It has climbed 20 percent since starting up in April.
The benchmark Shanghai Composite Index tumbled 4 percent today to the lowest in a month on speculation the government will intensify measures to curb accelerating inflation including higher interest rates and price controls. The index has plunged more than 8 percent since Nov. 11 on the expectation policymakers will raise rates for the second time in two months.
Precious Metals Outlook: Increasing margin requirements is a tool used by the establishment to suppress prices. This heavy handed behavior is typical of commodity bull markets, has a short term impact and often leads to excellent buying opportunities….
If at first you don’t succeed at killing the higher beta stock short hedge, try again. The CME has just raised its margin requirement on silver again, bringing maintenance margins up from $6,500 to $7,250, after hiking it less than a week ago for the first time and preventing silver from surpassing $30. Of course, why the CME is raising it more after the spot price of silver is now far lower than where it was at the first raise is a good question, but is most certainly due to the exchange’s “risk mitigation” concerns, and has nothing to do at all with the intent to continue killing PM prices. Far more importantly, the CME has finally relented and also raised gold margins, as we had expected. The new maintenance margin is up from $4,251 to $4,500, a minimal increase just to allow the CME to have the option (and making speculators well aware of this) of hiking rates again at any point it so chooses. All in all, all is now fair in fighting excess record liquidity. Look for a second round of imminent margin hikes in cotton, sugar, coffee and wheat, as the exchanges are suddenly very concerned about what retail margin collapses may mean for the non-existent wealth effect.
Currency Wars: The US$ leads the US equity market. The US$ has rallied 3.8% off the lows set after the QE2 announcement and surprise surprise the equity markets have struggled. Why the US$ rally? Read the stories below. As Europe sinks into another round of sovereign debt woes the US$ gains appeal vs the Euro. The saying ‘out of the frying pan into the fire’ comes to mind….
Reuters: IRELAND SAID TO BE IN TALKS TO GET FUNDS FOR GOVERNMENT, BANKS
Also noted that negotiations are continuing and no decision has been reached yet, according to sources. European finance ministers are meeting in Brussels today at 5pm local time. EURUSD jumps 25 pips on the headline but nothing firm yet. After all, could merely be wishful thinking on behalf of the bankers-kleptocrat politician complex, but it appears Ireland may crack soon
After Greek CDS went offerless, and is about to pass 1,000 bps following news of Austria’s defection from the EU rescue fund over Greece’s endless lies, now we get the next defector: Finland, who it appears is opposing an Irish rescue. This is not too odd, since Finland actually has a viable banking system whose viability does not depend on the generosity of Irish and European taxpayers. What this means, however, is that European unity is finally coming apart at the seams.
Disclosure: Long Gold & Silver assets