Following yesterday’s story that Spain is on the cusp of finally asking for help with German reluctance to agree, the Spanish Economic Minister after meeting with EU head Rehn yesterday said they are still analyzing the situation and “it will take the best decision for the interests of the Spanish economy and the whole of the euro zone.” Spain knows what conditions are expected from the EU and now seem to be studying how involved the ECB will be. Spanish stocks and bonds are rallying in the belief that we’re very close to finally getting on with this inevitable bailout. At the same time, we must get clarity on how the ESM will be utilized in capitalizing Spanish banks.


Of note elsewhere, the RB of Australia unexpectedly cut interest rates by 25 bps to 3.25% and the ASX responded with a 1% rally and the Aussie is near a 1 month low vs the US$. The RBA said “the growth outlook for next yr looked a little weaker, while inflation was expected to be consistent with the target.” The RBA had rates at 7.25% before the debt crisis then cut them to 3% by Apr ’09. Rates went up to 4.75% and now back to 3.25%. If there is one thing separating the RBA from other central banks is that REAL rates always stay positive. South Korea’s Sept Mfr’g PMI fell to 45.7 from 47.5, the lowest since early ’09.

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