Friday, March 11, 2011

Japan – the country was struck w/a massive 8.9 magnitude earth quake on Fri, the largest such
event in Japan since records have been kept (140 years). There have been 27 aftershocks w/magnitudes
of at least 5 since the initial quake struck. Tsunami alerts were issued for Japan, all its neighbors, as well
as California, Oregon, and Washington; all the country’s ports have been closed; the quake hit just
minutes before the Japanese market closed for Fri; equities in Europe were hit by the news (esp.
reinsurers); Some nuclear power plants and oil refineries in Japan were shut down and a refinery and a
major steel plant was ablaze. Some blue chip Japanese companies have reported plant
damage/outages. There was some worry about the Tepco Fukushima nuclear plant, although officials
say there was no radioactive leak (the reactor’s cooling system was apparently not working). Finance
officials said they would be watching markets closely (the BOJ pledged to ensure financial stability).
Moody’s said it was very unlikely that the quake would impact Japan’s credit rating – DJ/CNBC
Saudi Arabia – an official at the Saudi Interior Minister denied media reports and said that police
didn’t fire into the crowd during protests on Thurs (shots were fired “above” the crowd, not “at” it).
Also – officials said that rubber bullets were used. Saudi Arabia has accused some elements inside the
country of trying to “instigate chaos”. Bloomberg
Saudi Arabia – the country’s capital was quiet early Fri morning ahead of a day of planned
protests. Dozens of uniformed police patrolled main squares in Riyadh as scores of police cars toured
the streets. If protests take place, they might start up after noon prayers at 1 p.m. (1000 GMT) or after
evening prayers around 5 p.m. (1400 GMT). More than 200 protesters took to the streets on Friday in
the Saudi Arabian city of Hofuf, two activists told Reuters. A diplomat in the Gulf region said protests
were not expected to evolve into a mass demonstration on Friday. Protests were planned in other
countries on Fri as well (inc. Yemen, others). Reuters
China inflation comes in higher than St print ests (4.9% vs. the St 4.8%); note that some whispers
were calling for a number more like ~4.4% w/some even looking for a sub-4% print, making today’s
release esp. disappointing. One of the silver linings of China’s weaker growth was supposed to be lower
inflation, but so far that hasn’t occurred. JPMorgan thinks CPI could breach 5% in the month of Mar.
OPEC publishes its monthly report - Maintains 2011 Demand For OPEC Crude At 29.8M B/D;
World Economic Growth "Remains Robust"; Spare Oil Capacity Ready To Accommodate Disruption;
Spare Oil Capacity Was Almost 6M B/D Before Libya Crisis; Seasonal 2Q Demand Drop To Ease Oil Mkt
Pressure; said February output rose 110,000 barrels per day (bpd) to 30.02 million bpd, the highest since
December 2008 – DJ/Reuters
Debate rages about the direction of Treasuries once QE2 ends; Bill Gross’ most recent letter
(and the revelation that he has cut all long-term TSY holdings to zero) has spooked markets and sparked
a debate about how the market will look on Jul 1. Other managers are more sanguine and insist the
Treasury market is driven by economic fundamentals, not Fed buying. – FT
Treasuries – bond manager Gundlach made pos. comments on the Treasury market (earlier on
Thurs) – Gundlach thinks Treasuries have the potential to rally over the short-term and that the end of
QE2 is full priced in at current levels. – Reuters
Treasuries – Bill Gross tells CNBC why he sold all his long-term Treasuries - "It's not a question of
dissing the United States or questioning the credit of the United States, but simply a maturity
reflection," Gross said. Treasurys are "mispriced relative to the inflationary environment and the growth
we see ahead and there are better alternatives in order to capture yield." – CNBC – growth? What
about the new normal?