Lots of News Out This A.M.

The first market moving event was European CPI coming in a bit hotter then expected at 2.6 (consensus 2.4) which makes a rate hike by the ECB more likely to tame inflation, the Euro gained on that news earlier. Sticking with Europe, the Irish Bank Stress Tests are due out shortly, it's already been widely leaked that several banks will have to raise capital and the government wold be an obvious source of that capital. Should the government invest enough into the banks that it cracks the 50% ownership threshold, then the possibility of senior bond holder impairments becomes a very real possibility, it can't happen unless the government becomes the senior figure with over 50% ownership, but the possibility is increasingly likely and as such, bonds all over Europe are selling off including France, Italy and Spain. 


The expectations for a new E.Z. bailout mechanism aren't materializing as expected so once again, contagion becomes a big issue, especially if Spain/Italy's banking sector can't raise money with bond offerings because of the threat of "bond holder haircuts". I think the Euro could be in for a roller coaster day.


In the US, initial claims missed and came in higher and AS USUAL, last week's number's were revised higher from a beat to a miss (when was the last time they were revised lower?).


The Earthquake/Tsunami has already hit Japan's manufacturing hard, their PMI index plunged to the largest drop ever from 52.9 to 46.4. As with our PMI, readings under 50 indicate contraction.


Our own Chicago PMI came in a bit ahead of expectations at 70.6 (consensus 69.9, but a decline from the last reading at 71.2), once again seemingly good news in the headlines, bad news in the report... Prices paid hits 2008 highs and it's expected to get worse with the impact from Japan's manufacturing sector shut down in many cases.


Some comments "Commodity inflation hurting profits. Issuing first pricing increase in 3 year to help recover."
" It seems like it's time for everybody to jump on the "price increase" bandwagon, justified or not. "
And Finally the Fed releases thousands of documents pertaining to the discount window lending, this is the Supreme Court Case that was lost a week or so ago. There should be some juicy nuggets there.