One fire out, for now, but another flares up again

Just as one fire has been put out for now (Greece), the one that originally caused jitters in the markets in mid Jan, China, now flares up again. After the Asian market close, China raised reserve requirements by 50 bps to 16% a day after Jan loan data rose by the most since June ’09 and housing prices rose at the fastest pace since Apr ’08. While I understand the markets response this morning, particularly in commodities, China has no choice but to slow the extraordinary loan growth that has manifested itself in a massive property bubble. This proactive step is a good thing longer term but rarely is a smooth process in the short term. The US$ index is the beneficiary (as are US Treasuries), rising to the highest since July ’09, also helped out by a partial reversal in the weeks gains in Greek debt and below forecasted Q4 GDP growth in the Euro Zone. US data out today will shift some news focus back to here with Retail Sales being the highlight.

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