Market Moving Events

Today the EFSF representative is in China soliciting money for the EFSF and it is reported they believe China will invest between $50 and $100 billion dollars, however the Chinese have said no decision will be taken before the next G20 summit. Yesterday we covered some of China's demands and reasons they may not be so keen on investing, today adds more. Furthermore, Chinese vice finance minister said details on the expansion of the European bailout fund is still unclear, adding that purchases of EFSF bonds are not on the G20 agenda. Also, EFSF’s Regling said he does not expect to reach a conclusive deal with Chinese leaders during his visit to Beijing.


French Spreads are widening on fears of a ratings downgrade, this is being watched very carefully as contagion seems to be spreading to the core.


Italian Banks are resisting demands to raise capital as the EFSF has directed.


CITI has reiterated their "Short the Euro" stance and lowered their EUR target, the reasons are too plentiful to list here.


The Euro has seen some turbulence today (it is still below the two parabolic trendlines I drew yesterday and on a trajectory lower. Yesterday the ISDA (responsible for determining whether a credit event should trigger CDS insurance protection for bond holders said it was not a CDS triggering event making the insurance policies near worthless. However, Fitch ratings agency came out today and said a 50% Greek bond holder hair cut WOULD trigger a credit downgrade-exactly what the EU wanted to avoid by making it "Voluntary", which we talked about yesterday, as voluntary as a gun to your head.


In Italy, the first 10 year bond auction since the EU announcement that drove the market wild yesterday has been deemed a complete failure. Bond yields were supposed to drop (borrowing costs) instead the Italian 10 year hit 6.06%, the highest yield since Italy joined the EU currency. It is said, Where Italy goes, so the EU goes". The average 10 year yield has been 5.44%, the auction also failed to raise the target of $8.5 billion Euros.


Yesterday we saw the PIIGS countries seeing a drop in yields, which is what the EFSF wanted, today they are creeping higher-including in the core-the opposite effect of what was intended.


Investors are also realizing that the 50% Greek bondholder haircut (as mentioned yesterday) only applies to certain private investors, not to the ECB or any EU facility. The realization is setting in that this will bankrupt the Greek pension system as well as many Greek Banks. Yesterday I speculated we were seeing a knee jerk reaction, today real thought is being given to the hasty proposal.






In a major setback to EU EFSF plans, the German Constitutional Court suspended the use of a special parliamentary committee that was to make emergency decisions on the use of EFSF bailout funds. This is a major setback for the plans announced. This also means that EFSF secondary market bond purchases to support other countries is impossible until there is a resolution to the issue.


Spain today also posted horrible unemployment numbers.


In the US, personal Savings rates dropped to the lowest level since December 2007, which explains yesterday's beat in Q3 GDP which was largely because of consumer spending. This does not bode well for Q4 GDP as Americans have little left to spend. Remember, the market is about expectations moving forward, not about what has already happened, that is already discounted.

That's the major news moving the market or to move the market. Now I'll be sending out update on charts and requests.