China’s private sector mfr’g PMI for Dec fell to a 3 month low but at 54.4 still reflects expansion vs 55.3 in Nov. With inflation still a problem, the Yuan rallied to a new high vs the US$. Taiwan raised interest rates by an 1/8 pt as expected to a still low 1.625%, the 3rd hike this year. India’s Finance Minister raised his inflation forecast due to rising food prices and the RBI said inflationary pressures persist driven by global commodity prices. Expect another rate hike there in Jan. Last night the CRB food index closed at the highest since July ’08 and is only 2.5% from a record high dating back to 1981. With respect to US inflation, I’m of the opinion it is only when not if the rise in commodity prices being seen begins to show up in the government CPI and PCE figures.
The Euro Zone Dec retail sales index rose to a 31 month high led by Germany and France. Italy sold 3 yr and 10 yr paper at a yields almost 40 bps higher than last month.
AAII: Bulls 51.6 v 63.3, Bears 20.1 v 16.4