China to the rescue! At least for today. Both the Chinese state and private sector weighted PMI manufacturing indices rose to 7 month highs but higher inflation came with it as input costs rose to the most since June ’08. There were also gains in the Taiwan and South Korean PMI indices and the Kospi has since rallied back all of what it lost post the North Korean bombings. Also in Asia, Thailand unexpectedly raised interest rates by 25 bps to 2% as “inflation pressure is expected to rise…in line with economic growth.” Expect rate hikes throughout Asia to continue into 2011. Ahead of the ECB meeting tomorrow and after a successful 12 month bill auction in Portugal, bonds are rallying in Italy, Spain, Portugal and Ireland. Portugal’s auction was priced to yield 5.28% vs 4.81% in the one sold on Nov 17th with a b/c of 2.51 vs 1.8 in Nov. Spain comes to market with 3 yr paper tomorrow.
Due to a 3 month high in the average 30 yr mortgage rate to 4.56%, the MBA said refi’s plunged 21.6% to the lowest since June but purchases eked out a small gain of 1.1% and puts the level at the highest since early May. Coincident with the rise in the last UoM and Conference Board Consumer Confidence figures, the weekly ABC poll rose 2 pts to -45, the best in 7 weeks led by the State of the Economy component which matched the highest since Oct ’08. Investor bullishness in the newsletter community remained high, albeit a touch less so as Bulls fell to 55.4 from 55.7 and Bears rose to 21.8 from 21.6, according to II.