Recap 1-23-12

Main Items:

  • Newt Gingrich achieved an upset win over Romney in South Carolina, winning >40% of the vote and beating the former Massachusetts Governor by more than 13 points.
  • The NYT claims Obama will emphasize measures designed to help housing and stem foreclosures, will reiterate his desire to raise upper-income tax rates, offer tax incentives for creating American jobs, new tax breaks for manufacturing, support for clean-energy incentives, and new education initiatives. Obama will also ratchet up the rhetoric against China, reiterating his call for a stronger yuan. The President will address the nation tomorrow night
  • The US, UK, and France sent a series of warships through the Strait of Hormuz w/o incident (Iran had threatened to shut the Strait if the West sent more military assets through it). The fleet was led by a US aircraft carrier. Bloomberg/London Telegraph

Overseas:

  • EU Consumer Confidence improved to -21 in Jan vs -21.4 exp and -21.1 prev
  • French Business Confidence declined to 91 in Jan vs 95 exp and 94 prev.
  • The widely expected PBoC RRR cut ahead of Chinese New Year appears to be postponed.

Commentary:

GS advised shorting 10y Treasuries this morning, targeting 126 with a 132 stop. TYH2 closed Friday at 130-08+. They note that the vast majority of market participants expect the FOMC meeting on Wed to ease financial conditions, suggesting that it has all been priced in.

Separately, IF this move in EURUSD continues, an analog chart vs average EU sovereign spreads (w/3m lead) suggests the possibility for a rally through early Feb.

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