Giddiness and better data

A combination of beginning of the year giddiness and better than expected economic data in Asia and in Europe has the S&P futures well bid. Germany’s unemployment rate fell to 6.8%, the lowest since its reunification in 1991 as the amount of people unemployed fell more than twice expectations. UK mfr’g PMI unexpectedly rose to 49.6 from 47.7. In Asia, China’s mfr’g PMI rose back above 50 at 50.3 vs the estimate of 49.1 and PMI services jumped to 56 from 49.7. India’s mfr’g PMI rose to the best since June as did Taiwan’s. Also, mfr’g in Australia rose back above 50 for the 1st time since June. South Korea’s mfr’g PMI however fell a touch. In the 1st sign that yr end 2011 funding pressures have been temporarily alleviated, the euro basis swap is narrowing to the lowest since Nov 9th and euribor/ois spread is the cheapest since mid Dec and down 4 bps in the past 2 days. US$ 3 mo LIBOR though is up a hair. As I believe the most important factor in how the markets end 2012 will be determined by the actions of the ECB, the Bundesbank Pres is again saying it would be wrong for them to assume the lender of last resort for individual countries and Italian and Spanish yields are up slightly. The ECB did fully sterilize its 211.5b euros.

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