G3 Recap 11-10-10

Main Items:

  • US Initial Jobless Claims dropped to 435k last week vs 450k expected and 457k previously
  • US Import Price Index rose to 3.6% YoY in Oct vs 3.9% expected and 3.5% previously

Overseas:

  • China is hiking the RRR for all banks by 50bps starting 11/16. As CPI is released at 9PM ET today, there are speculations that it will print well above the 4.0% expected.
  • Chinese Trade balance jumped to 27bn in Oct vs 25bn expected and 17bn previously. This is undoubted uncomfortable for China ahead of the G20…
  • UK November Inflation Report was not very different from the August Inflation report, with the exception of higher forecasts for inflation in the near term.
  • Taiwan increased capital controls, limited the amount foreign investors can place in local government bonds (with maturities > 1yr) to 30% of the amount remitted.
  • PIGS:
  • Greek 2010 budget deficit will be revised to 9.2-9.3% vs the target of 7.8%
  • Ireland announced an extension of the bank guarantee scheme through June ’11; the guarantee was due to expire Dec 31 (it was already extended once). Irish Times

Commentary:

  • A wild rollercoaster of a day today. Treasuries cheapened up enough for strong hands to finally step in, despite better than expected jobless claims and a bad 30yr auction.
    Interestingly, despite the fact that gold was down $27 at one point today, gold Implied Vol actually ended lower on the day. It’s still not clear how much of this sell off so far is due to margin increases in silver, but option players appear pretty unconcerned.
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2 thoughts on “G3 Recap 11-10-10

  1. Copper touching it’s all-time high of 8940 this morning in London. The non-ferrous metal community convinced it will break 9000 very soon and 10,000 sometime in 2011.
    Crude oil (Brent) trying hard to break thru 90 with lot of volume trading just sub-90 also
    this am in London.
    The oil trading community also here very bullish and seeing $100 oil in 2011 as a dead cert.

    Note that both copper and oil have lost a lot of their strong’sh correlation with $/EU cross.

    Conclusion: copper and oil are more and more trading on fundamentals and thus attracting a lot of fund money again who believe in the super cycle story.

    1. Hi PPK –
      I am fully on board the super cycle idea, but I feel like the rally in oil and copper is not as significantly driven by fund money, (yet) mainly because in my experience a high level of fund involvement increases commodity correlation with equities.
      Nevertheless, I think your general premise is right, in that better commodities performance will increase trend following behavior from real money.

      Cheers!

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