China stocks slammed/PIG debt rallies

Chinese stocks and the rest of Asia did not respond well (Shanghai index down 5.2%) to the 4.4% rise in Chinese CPI and the faster than expected loan growth in Oct as it spurred fears that the PBOC will quickly respond with another interest rate hike. While most of the rise in CPI was due to food prices, the nominal per capita income of the Chinese people is only $3,700 so inflation must be tamed there. Positively today, bond yields in Ireland, Portugal and Greece are lower after the G20 said any new, permanent EU bank bailout vehicle would only come alive in mid ’13 and there would be no change in terms for existing debt, only for new, incrementally issued debt. The euro is bouncing in response even though Q3 GDP for the Euro zone was a touch below expectations as growth in Germany, France, Italy and the Netherlands missed the mark. Greece’s GDP q/o/q contracted for a 9th straight quarter but not as much as expected.

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