Market action/China/PIG debt/QE

As we look to a new Q, lets see how Q3 ended. The last 7 trading days since the FOMC laid the groundwork for more policy initiatives, the S&P 500 is up just 1.3 pts or .1%. Over the same time period however, crude is up by $6, gasoline is up 7.5%, gold is up by $40, the CRB index is up 3%, the CRB RIND went to a record high and the $ index is down by almost 3%. PIG debt is rallying sharply for a 2nd day with the Greek 2 yr yield below 8% for the 1st time since mid June and their 10 yr close to moving below 10%. Ireland and Portugal short term yields are lower by another 30 bps. Following the lower than expected roll of ECB funds, which is a good thing, 3 mo Euribor and euro LIBOR are spiking to the highest since mid July ’09 as less liquidity is in the banking system. China followed the better than expected private sector weighted PMI with a 4 month high in the public sector focused manufacturing PMI.

I was about to write on Income and Spending but was sidetracked by this comment from Fed voting member Dudley who said in a speech, “Further action is likely to be warranted unless the economic outlook evolves in a way that makes me more confident that we will see better outcomes for both employment and inflation before too long.” Since we are only a month before the next meeting and the Fed seems to have little patience as evidenced by Dudley’s comments, strap on your seat belt and close your eyes.

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