Red Flags Are Popping Up As The World Has Delivered Some Big Economic Surprises Today From From Australia, Japan, Europe, And U.S., Stock Markets Reversed Early Gains Sharply, Euro Drops Below $1.2750

After two-decade downturn, Bank of Japan unleashes world’s biggest stimulus – $1.4 trillion!


(Reuters) – The Bank of Japan unleashed the world’s most intense burst of monetary stimulus on Thursday, promising to inject about $1.4 trillion into the economy in less than two years, a radical gamble that sent the yen reeling and bond yields to record lows.

Bank of England keeps policy steady despite new remit


Here’s A Bunch Of Ugly Numbers Out Of Europe

From Markit Economics:


Australia data was much better than expected and provided further fodder for arguments that the RBA’s easing cycle is over at 175 bp.  February retail sales jumped 1.3%, rather than the 0.3% the consensus expected and the robust 0.9% rise in January was revised to 1.3%.   Separately, Australia reported building approvals rose 3.1% in Feb, which was also better than the 2.5% expected and the January series was revised to show a smaller decline (-2% rather than -2.4%).

The Australian dollar initially rallied, but was unable to rise above yesterday’s high just shy of $1.05 and returned to almost $1.04.     A potential double top is in place near $1.05.  A break of the neck line, seen at Monday’s low near $.10385 needs to be taken to confirm the pattern.  It would project toward $1.03, which also corresponds to a 50% retracement of the rally from the early March low set net $1.0115.


The initial jobless claims number is out, and it’s ugly.

Initial jobless claims have spiked by 28K week over week to 385K.

Analysts had expected 353K.

This is the second weak datapoint in a row.

Yesterday we got an ADP report that missed notably.

Tomorrow is the Non-Farm Payrolls report, which should be exciting.

Italy Delays $50 Billion Payment of State Debts!!!

Italy’s caretaker government announced on Wednesday it was delaying approval of a decree to pay back some 40 billion euros ($51 billion) of state debts to private firms.

The legislation, which Mario Monti’s outgoing administration says can provide vital liquidity to Italy’s cash-strapped companies and help tackle a deep recession, was scheduled to be approved at a cabinet meeting later in the day

Jamie McGeever‏@ReutersJamie2 h
Italian politics suggest “the implausible is a possibility”, a 5-10% chance govt is formed that will take Italy out euro – huge global hf.

zerohedge‏@zerohedge1 min 
The Spanish Pension Fund in 2012 increased its domestic sovereign debt holdings to 97% of its assets from 90% at end of 2011 – BBG

The Euro Is Tanking

Here’s a look at the move in the euro.





Red Flags Are Popping Up For Both The Economy And The Market

The amount of worry is building.

The news that initial jobless claims have spiked to 385K is a good time to bring up two big themes we’ve been talking about lately.


One is that people see the economy rolling over a bit.

The other is that people see market internals deteriorating.

First on the economy we wrote on Tuesday about fears of a “Spring Swoon.” Although Q1 numbers looked great, with GDP coming in as high as 3.5%, estimates for Q2 are already below 2% in many cases. In the last couple weeks there have been a fair number of downside economic surprises.

And then on the market there’s a lot of talk about market internals.


RICHARD KOO: I Worry About The Recent Moves In The Currency Markets

They may be unaware of the relationship between the money supply and the monetary base.

Timely commentary from Richard Koo of Nomura here who says that the currency markets are misunderstanding the impact of QE.   Given the BOJ’s open-ended commitment to QE that was just announced, it’s interesting to see how the markets are indeed responding to the big talk out of BOJ.  Whether they can deliver is a whole different matter.  Koo clearly thinks they can’t:


“I worry that recent moves in the forex market have been driven solely by announcements regarding quantitative easing and not by the relative changes in actual money supply.

This is an indication that many forex market participants remain unaware that the relationship between the money supply and the monetary base has since 2008 (and since 1990 in Japan) morphed into something very different to what the textbooks predict.


Roubini: Eurozone Plagued with Austerity and Bailout Fatigue

The eurozone is showing signs of breaking down, economist Nouriel Roubini writes in an article for Project Syndicate.

The eurozone is showing signs of breaking down, economist Nouriel Roubini writes in an article for Project Syndicate.

Although the European Central Bank (ECB) reduced the risk of a euro break-up with its commitment to backstop sovereign debt last summer, the European Union’s fundamental problems have not been solved, says Roubini, a professor at New York University and chairman of Roubini Global Economics.

“Moreover, the grand bargain between the eurozone core, the ECB and the periphery — painful austerity and reforms in exchange for large-scale financial support — is now breaking down,” Roubini warns, “as austerity fatigue in the eurozone periphery runs up against bailout fatigue in core countries like Germany and the Netherlands.

FTSE 100

CAC 40