Did Santa Clause Leave Coal in Everyone's Stocking

 

So what did Santa Clause bring everyone this year? Well for starters China and Russia both hiked rates. Chinese automobile sales may fall –50% because of new regulations which does not make a a strong case for the “New” General Motors.

Chinese officials made comments about the about the situation in Europe, saying that  there are no “quick fixes” for the “chronic” problems impacting the Eurozone. This is the complete polar opposite of what the capital markets were expecting, so this could have negative consequences for the creditability of the ECB being able to restore confidence.

International Headlines

· Russia hikes rates on Christmas Eve – Russia raised overnight deposit rates by 25bp and left other rates unchanged; officials cited growing concerns that rising food prices will spur broader inflation.  This was the first time Russia tightened policy since ’08.  WSJ   

· China hikes rates on Christmas Day; second time in nearly 2 months (last time was Oct 19); The People's Bank of China said Saturday that effective Sunday, it will raise the one-year yuan lending rate by a quarter of a percentage point to 5.81% from 5.56%, and the one-year yuan deposit rate to 2.75% from 2.50%.  More rates hikes have been expected, although most thought China wouldn’t move again until ’11 (Jan or Feb timeframe); Beijing has been aggressively raising bank RRRs and some investors had come to think this was the country’s preferred method for fighting inflation (vs. outright rate increases) – WSJ   

· China’s Wen on Sunday said that he was confident in the country’s ability to keep inflation in check in ’11 and said he would speed up efforts to reign in rising home prices – Reuters 

· China – Ba Shusong, a researcher at the State Council’s Development Research Center, said that the country will enhance its regulators to prevent hot money from entering and having a destabilizing impact – Bloomberg 

· Europe + China – a Chinese official delivers harsh remarks about the situation in Europe, noting that there are no “quick fixes” for the “chronic” problems impacting the Eurozone sovereign debt markets.  The Chinese official said the country would be on high alert for signs of escalation in Europe, esp. in Jan and Feb.  Reuters   

· China - the country’s officials maintain rhetoric against inflation – officials on Fri said they would deploy a range of tools and policies to maintain the fight against rising prices – Reuters 

· China – the co is targeting industrial output growth of 11% in ’11, down from 15% in ’10.  The country is aiming for an industrial output CAGR of 10% over the next 5 years.  Bloomberg 

· China – the country’s industrial output is likely to grow ~15% in ’10 vs. the prior year – Reuters 

· China – will increase spending on water conservation projects by 10% to 200B yuan in ’11.  Bloomberg 

· China has appointed Miao Wei, a former automobile executive, as its new industry minister, replacing Li Yizhong – Reuters 

· China auto sales – vehicle sales in Beijing may fall 50% in ’11 b/c of new license plate restrictions.  DJ  

· Japan – “may run out of extra budget funds, raising fiscal concerns” – Bloomberg article discusses how money sitting in unused accounts and reserves, which the government plans on using to help plug budget holes, is disappearing.  Bloomberg 

· Japan tightens short selling rules; Japan’s FSA said it would tighten up short selling rules around offerings – FT 

· Japan's Prime Minister Naoto Kan is leaning toward a cabinet reshuffle before a parliament session next month – Reuters 

· Vinashin – the Vietnamese shipbuilder defaulted on a $600MM syndicated loan to int’l lenders but said it would continue to make interest payments.  WSJ 

· North Korea maintains bellicose rhetoric – warned that the US and South Korea, by their actions in the region (inc. their repeated military exercises), are “inviting a nuclear war”.  Bloomberg

· North Korea – a South Korean think tank has predicted that the North will test another nuclear weapon in ’11.  Bloomberg 

· India reassures over onion prices - Finance minister Pranab Mukherjee today said prices of onions have come down from the sky-high levels seen earlier this week and the situation will be in control soon – Times of India. 

· UK increasingly facing an inflation problem that could become the story of ’11 – London Telegraph. 

· Swiss franc strength being discussed – the country’s government, along w/the heads of its top banks, are talking about ways of shielding Swiss exporters from the strong franc.  The purpose of the talks is to get banks to have a currency risk insurance.  Reuters. 

· Crude – Kuwait’s oil minister says the global economy can withstand $100 oil while other officials suggest that OPEC won’t raise supply through ’11.  Officials at an Arab oil summit this weekend said that stocks are high and prices are being temporarily inflated by cold weather in Europe.  Qatar’s oil minister said there would be no OPEC meeting before June.  Reuters