China to the rescue!?/ECB still wants to hike

With the FT reporting that the head of the EFSF is saying that Asia, particularly China, will be good size buyers of debt the EFSF will issue to finance the bailouts, the bonds of Portugal, Greece, Ireland, Spain and Italy are mostly higher with yields down. The euro is getting a lift as a result but also is getting helped out by tough inflation talk from ECB members who continue to separate their monetary policy with the fiscal troubles in the region. Draghi, the likely new ECB head in Nov, said “there is a greater need to proceed with monetary policy normalization.” Trichet said there are “upside risks to medium term outlook for price stability.” The market reaction to the weak US$ has begun to splinter over the past few weeks with today clear evidence of that as commodity’s are lower on the economic slowdown theme. The Shanghai index fell for a 6th straight day but other Asian markets bounced from multi month lows. In the US, individual investor sentiment remained on the cautious side as the AAII said Bulls were little changed at 25.6 as were Bears at 41.4.

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