Events Today

Events Today:



Norway Oct. CPI and Producer Prices (0900)
UK Oct. PPI Input/Output (0930)
Canada Oct. Housing Starts (1315)
Canada Sep. New Housing Price Index (1330)
US Treasury's Kashkari to discuss TARP (1500)
Japan Sep. Current Account (2350)
UK Oct. BRC Retail Sales Monitor (0001)
UK Oct. RICS House Price Balance (0001)
Australia Oct. NAB Business Confidence (0030)
China Oct. CPI (0200)

Market Comment:

China gets serious on stimulation
China announced a massive CNY 4 trillion stimulus package over the weekend as the global economic growth deceleration is finally hitting the Chinese growth miracle with full force. This enormous package represents some 20% of Chinese GDP, making the puny 1-2% stimulus package ideas being bandied about by US lawmakers look puny in comparison. Some have suggested that growth rates of 5-6% would represent a truly hard landing for the China due to its historic shift to an industrial economy that creates massive pressures to increase the numbers of jobs as the population migrates from the countryside to the city. China will be sorely pressed to avoid this hard landing due to the imbalances in its economy that focus so heavily on production rather than consumption. For now, markets have decided that this is good news, but the rally in risk it has brought on is unlikely to last beyond the shortest term.

-
Heavy supply in new US treasuries this week
This week will be an interesting one for measuring the demand for US Treasuries, as the US treasury will auction some $55 billion of securities this week, the most in one week since 2004. The amount of issuance arriving in the coming year is mind-boggling and one wonders where the buyers will come from. If yields begin to rise due to insufficient treasury demand while economic data remains weak, this could add to pressure on the markets. Keep an eye on the US 10-year note futures, therefore. Signs of strong demand would be USD bullish.

CAD: still on borrowed time
The Canadian employment data for October released on Friday was far better than expected, but as we discussed, the Canadian economy has historically been closely coupled with the US economy and will not escape its growing negative drag. USDCAD should eventually try back toward the 1.3000 area and we would expect the pair to find support in the 1.1500-1.1800 area.