Inflation expectations at 5 yr highs/Japan bounces

The worst fears were not realized after another earthquake in Japan and the Nikkei rallied almost 2% overnight and is now at the highest level since right after the March 11th disaster. It’s now 13.5% off its lows but still 6.3% below the closing price on March 10th. The dollar is continuing to suffer as the euro heavy US$ index has broken down to the lowest since Dec ’09 and its sending gold to fresh record highs and Brent crude is just $20 from a record level. Gasoline prices are up another .08 this week as of last night according to AAA to $3.74, and is up .60 from the middle of Feb. Global bond yields are all higher, particularly in Germany with the bund 10 yr yield at the highest since Aug ’09 and French yields at the most since July ’09. UK PPI in March rose 5.4% y/o/y, above expectations of 5.1%. Inflation expectations in both the 5yr and 10yr US TIPS are now at 5 year highs.

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