Open for the 1st time in a week and responding to yesterday’s rate hike, the Shanghai index fell almost 1% and it helped to drag down the entire region. Indexes in Hong Kong, India, Taiwan, South Korea, Singapore, Thailand and Indonesia all fell more than 1% on the same theme, higher inflation and higher interest rates in response. In contrast, Bernanke will testify today that there is nothing to fear with inflation and rates at 0 – 25% is prudent along with more asset purchases in order to boost employment. The Fed of course has also unofficially added a 3rd mandate to its official two of price stability and maximum employment and that is higher asset prices. Today comes at a very interesting time as the bond market has begun the tightening process irrespective of the Fed’s timetable of doing so. The avg 30 yr mortgage rate rose 3 bps to 5.02% according to Bankrate.com, a 6 week high. The MBA said refi’s fell 7.7% and purchases were down 1.4%.
ABC confidence fell 5 pts to -46, 1 pt below the 1 yr average as the Personal Finance component fell to match the lowest level since Nov ’09 and is evidence that while the economy is certainly improving, the path is still lumpy. II: Bulls 53.4 v 52.7 Bears 23.3 v 22.0