To print or not to print, that is the question. The markets yesterday seemed to suggest that perhaps the world isn’t getting ready to go on a massive money printing party after all. European Central Bank Chief Mario Draghi vowed that he would do whatever it takes to save the euro, might not mean that much without the support of Germany. Besides, with better than expected data in the US and in the aftermath of the Fed’s extension of Operation Twist, the odds that the Fed will wait before they embark on QE3 is a real possibility. Yet with China manufacturing weakness, overnight we're seeing a bounce in crude oil on renewed hopes that China may step up to the plate with some money printing magic!
All right Mario, you got the markets all excited but can you follow through? You may have the power to influence some members of the ECB but can you act without Germany having your back? It is clear that when Bundesbank President Jens Weidmann says the ECB shouldn’t exceed its mandate, you will have a difficult time doing “whatever it takes” at least at this meeting. German Finance Minister Schauble said, “The rules of the European Stability Mechanism don’t foresee a banking license to allow refinancing at the European Central Bank”.
The oil market also sold off on better than expected economic data in the US making it less likely that the Fed will move at this meeting. Products led the way down on news that the Enbridge pipeline, that was feeding some Illinois refiners, will be back in operation today and a restart at the Sunoco refinery.
Oil prices also got a shocking report from the American Petroleum Institute as they reported that crude supplies disappeared on the Gulf Coast. The API reported an almost unbelievable drop of 11.6 million barrels of oil in its weekly report. We have not seen a fall like it since Sept. 5, 2008 in the aftermath of Hurricane Gustav and Hanna. Of course traders are scratching their heads and before they get too excited about it, they will wait to see what the Energy Information Administration says.