The Fed’s soul mate in the policy of cheap money and QE, the Bank of England, has a big problem on its hands as the UK reported Dec CPI rose 3.7% y/o/y, the fastest rate since Nov ’08 and the 12th straight month above 3%. The m/o/m CPI rise of 1% was the highest since at least ’96 and the UK 10 yr Gilt yield is rising to the highest since May ’10 in response. The BoE has its benchmark rate at .5% so they are doing a good job of expropriating the wealth of savers in the UK. Also, German Bund and French 10 yr yields are rising to the highest since Apr ’10 as investors realize that both will be taking on more financial responsibility for the rest of their EU friends. Germany’s ZEW investor confidence # did rise to a 6 month high at 15.4, well above forecasts of 7.0. Spain sold 12 month and 18 month paper successfully and the IBEX index is at the highest since Nov. Elsewhere, yesterday the Shanghai index closed at the lowest since early Oct.
