Overnight, the Nikkei started to bounce off its lows just 17 minutes into their day (still closed lower by 1.4%) and as it steadily recovered most of its losses, the S&P futures rallied too. The yen continues to rip higher vs the US$ as the repatriation process continues but is 2 yen off its overnight highs. Let’s hope we get facts from authorities today on what is going on rather than opinions of nuclear chief’s outside of Japan. India didn’t let the Japanese disaster and threat to global growth hinder their inflation fighting as they raised interest rates 25 bps and said “the underlying inflationary pressures have accentuated, even as risks to growth are emerging.” In Europe, Spain sold 10 and 30 yr debt at yields slightly below that of similar maturities sold last month. The Euro is rallying back to 1.40 and it’s sending the $ index down to just shy of its lowest level since Dec ’09.
Feb CPI both headline and core were .1% above expectations up by .5% and .2% respectively. The .2% core gain is for the 2nd straight month for the 1st time since Sept/Oct ’09. The y/o/y headline gain is now 2.1%, the highest since April ’10 and the core y/o/y rise is 1.1%, the most since March ’10. The absolute cost of living is at a new record high. Owners Equivalent Rent, 25% of CPI, rose a still benign .1% but apartment vacancy rates are falling and rents are moving higher so this trend bears watching in terms of impacting core CPI. Commodities, which make up 40% of CPI, rose 1% and is up 3.1% y/o/y. After a 1% rise in Jan, apparel prices fell .9%. Vehicle prices rose .5%. Bottom line, statistically the Fed will read the data as being subdued but the trend is clearly higher and the 2.1% y/o/y gain is back to the Fed’s implied inflation target at the same time REAL interest rates remain firmly negative.