Is China's Reserve Rate Hike a Countermove to QE2? (New York Times) As widely reported today: "Commercial banks were ordered to transfer an additional 0.5 percent of their assets by Nov. 29 to very low-yielding accounts at the central bank, the People’s Bank of China." How could that be viewed as a countermove against the Fed?
The Times continues: "The central bank relies mainly on these reserves for the renminbi it requires to buy about $1 billion a day worth of dollars, euros and other currencies — purchases that prevent the renminbi from appreciating." The 50 basis point hike will bring the total required Chinese reserves to 18 percent. (By contrast, the Federal Reserve typically requires U.S. banks to hold 10 percent reserves.) Or are Chinese concerns about 'overheating', inflation, and the creation of asset bubbles growing? Or are both inflation and a dollar play responsible?
Ireland to Take the Deal? (Financial Times) Ireland seems to be on the verge of accepting an international bailout proposal: "Government ministers will meet on Saturday to complete the plan, which will involve at least €15bn ($20bn) of spending cuts and tax increases—or about 10 per cent of annual economic output—from 2011 to 2014." But it may be this paragraph that is most worth remarking upon: "Experts from the International Monetary Fund and the European Union spent Friday in Dublin combing through the balance sheets of Ireland’s stricken banking sector as well as the public finances, with a view to determining how big the bail-out should be."
On the brink of an international bailout deal—after many months of Irish review, and after the completion of a national bailout program — there is still some uncertainty about the current positions held by Irish banks. What does that tell us about the valuations of those assets?
Ben Hits Back on Currency (Wall Street Journal) In remarks aimed at China, among others, Chairman Bernanke criticized policies he believes are not helpful to the global economy in general, and to the economy of the United States specifically: "By keeping their currencies artificially weak, Mr. Bernanke argued in Frankfurt Friday, China and other emerging markets are allowing their economies to overheat, preventing trade imbalances from adjusting and worsening what he called a 'two-speed" global recovery." And even when Bernanke made generic remarks, not aimed at any specific country, was there any doubt to whom he was referring? (Hint: Who owns the lion's share of U.S. Treasury debt?)
Soc Gen Trader Convicted of Stealing Code (Wall Street Journal) In a story we at NetNet had commented on before, "former Société Générale SA trader was convicted on Friday of stealing the French bank's proprietary code for its high-frequency trading business. Federal prosecutors had alleged that Samarath Agrawal secretly printed out copies of the bank's computer code last year and planned to use it to build a copy of SocGen's trading program at a competitor."
Market Poised to End Weak Down. Again. (Yahoo Finance via AP) "U.S. stocks were lower on Friday, after the People's Bank of China raised bank reserve requirements for the second time in two weeks, stepping up its fight to rein in prices, a move that could temper growth. Losses eased by midday with light selling across the market and isolated pockets of gains in the materials and industrial sectors. Financials were the weakest sector, with JPMorgan Chase & Co, a Dow component, off 0.6 percent to $39.41."