All for one, and one for all!? Japan joins China to form their own Two Musketeers in saying they will help Europe in bailing out troubled countries. Japan is approaching this indirectly and is certainly not doing this out of the goodness of their heart. They are more attracted to the AAA rating of the European Financial Stability Facility that will be the financing vehicle right now for Ireland and likely soon Portugal. In terms of this week’s sovereign fund raising, the easy part is over and Wed and Thurs bring the tougher part. Greece sold 6 month bills at a yield of 4.9% vs a yield of 4.82% 2 mo’s ago and Italy sold 1 yr paper at a yield of 2.07% vs 2.01% last month. The more difficult sales of the week will be Portugal’s 3 yr and 10 yr debt tomorrow and Spain’s 5 yr and Italy’s 5 and 15 yr on Thursday.
China’s economy is still showing signs of overheating as Dec bank loans rose 481b yuan, well above expectations of 360b yuan. For 2010, bank loans totaled 7.93T yuan, above the Chinese authorities target of 7.5T but down from 9.6T in 2009. Also, M2 in Dec rose 19.7%, above the forecast of 19%. Their FX reserves rose to a new record of $2.85T from $2.65T in Nov and above expectations of $2.76T. Back in the USA, the Dec NFIB small business optimism index disappointingly fell to 92.6 from 93.2 and was below the estimate of 94.5. There were though some bright spots as Plans to Hire and Plans to increase cap ex both rose. After spiking in Nov, those expecting a better economy moderated but more businesses expect higher sales. A broad based economic recovery will not take place until small businesses are fully on board.