Interest rate decision day brought no news of policy changes from the Bank of England and it brought the expected rate hike from the ECB. The former’s rate committee decided to stand pat as the British economy struggles to recover while the latter’s team of policymakers bumped the central bank’s key lending rate up to the 1.5% level.
Over in China, government advisors were quoted as saying that the PBOC will need to tighten monetary policy even further and that Wednesday’s rate hike was “still not enough.” The China Securities Journal contained a report that concluded that “curbing inflation should remain the top agenda for the government. It's better to raise interest rates sooner than later to stabilize expectations."
China-oriented commodity bulls are grappling with a plethora of “issues” coming from that country; ones that make for a rather difficult to maintain perma-bullish posture at this juncture. The intense anti-inflation combat the Premier Wen has openly embraced, the string of interest rate hikes by the PBOC, and the on-going social problems (read: wealth-gap) in the country are all factors that should be unnerving those who bank on China as the de facto “Miracle-Gro” for commodity prices, from here to eternity.
The euro however traded slightly lower in the wake of the ECB’s Thursday morning rate move as selling pressure issuing from the most recent Moody’s downgrade (that of Portugal) continued to be manifest in that currency. Meanwhile, the US dollar added 0.37 on the trade-weighted index and was last seen trading at the 75.32 level. Later in the session, the greenback gave back some of those gains and drifted to under the 75 mark on the index. Oil, on the other hand, managed a $1.70 gain and fast-approached the $98.50 level.
Mr. Trichet’s monthly news conference was, as expected, dominated not so much by questions about inflation and interest rates as about the European debt situation’s current state of disarray. The ECB President said that his institution would temporarily suspend its minimum rating requirement for the acceptance of Portuguese collateral. Take that, Moody’s…
Meanwhile, hedge fund vigilantes are piling on bets that would be paying off in the event that the sovereign debt crisis spreads from Greece to Portugal, Spain, Italy and to Ireland. Some of these gamblers expect certain European countries to eventually nationalize certain banks as well as sell assets when the borrowing binge unwinds. Wagering on Armageddon: What a noble enterprise….
Speaking of noble enterprises, the Washington-based debt ceiling “talks” (make that game of semantics) resumed today under close scrutiny by everyone. Someone who is watching all of the wrangling in DC unfolding is not only not amused/impressed, but he appears annoyed. Warren Buffett told CNBC that the US Congress is playing a “silly game of Russian Roulette” with the default issue. Mr. Buffett echoed President Obama’s words uttered the other day when he noted that the country should not be making such crucial decisions “at the point of a gun.” He offered to pre-pay $3 billion in Berkshire quarterly taxes to the US Treasury in order to show that he is doing his patriotic part. Hello, Mr. Boehner & Co.?
June’s ADP private employment report showed US-based jobs gains on the order of 157,000 positions; a figure that handily surpassed even the most optimistic analysts’ expectations (they had clustered around the 70,000 level). America’s service sector added a hefty 130,000 positions on the month. The news release helped lift Dow futures early this morning. It also added a few notches to the greenback’s aforementioned early gains on the index.