China/If only bank bondholders took a loss…

Asian markets got hit hard overnight, partly in response to the US Payroll data and equity selloff but also due to a decline in the China PMI services index to 55.2 from 56.1, the lowest since the data in its current form started in Mar ’11. The Shanghai index, which was little changed on Friday after the drop in the mfr’g PMI, fell 2.7% overnight to an 8 week low. In the newswire analysis game in Europe, according to the FT, Spain’s PM “has called for centralized control of national budgets in the eurozone in an unexpected gesture to mollify Brussels and Berlin.” While Merkel said “under no circumstances” would she back euro bonds, it was the prospect of EU fiscal budget oversight that Germany in the past hinted they would go for in return for a form of euro bond. Der Spiegel is also reporting that Merkel is “pressuring Spain to accept bailout money.” Whatever form either a bailout comes or Spain somehow finds a way to get the money from the capital markets, bank bondholders are again getting saved at the expense of the taxpayer. Whether in the US or in Ireland, policy makers don’t like hurting the feelings of bondholders and thus losses get eaten by the rest of us instead of those that took the risk. Portugal got 3 thumbs up from the ECB, EC and IMF (troika) as they said their “program remains on track amidst continued challenges.”

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