Today, we had a Holiday. This Morning, lets look at China effects, Strength of European Equities, Earnings, and Indicators.

Today was president’s day in the U.S. With it comes a respect and dignity.

Still, markets worked through the world and we know functions across the globe. Of note is the function of the European equity markets, in view of Greece and China.

Today, European equities reached a 7 month high against a closed U.S. market. Typically the U.S. NYSE will lead the way. Such a response from Europe tells of a strong confidence in its course.
Still, its course resides in Greece.

Aside from Greece, last week China announced a course of bank reserve easing. This easing is expected to free some $55B to $63B in lending to China’s sustainable growth. China’s GDP has grown at remarkable rates. These rates resulted in many commitments to infrastructure growth. Such infrastructure includes roads, that once built are low on sustainability needs, except for maintenance. Still roads need a fund in reserve to sustain the road.

More importantly is the implication of China’s relaxing of reserve requirements in view of energy requirements. So many million watts of energy have been brought on line. These sources need fuel by coal or natural gas, or petroleum.

Once China released banking reserves, the world of investors that bought investment in China’s infrastructure had cause for expectation of sustainability. Today, billions of dollars breathed a sigh of relief. Not only did these billions find relief, but the export and import potential of the Western and Eastern worlds' investment remain alive and active.

Inflation in China is more on the balance of hardship than here in the U.S. Where we see consequences of global rebalancing, so does China.

In the Western investment world, we wait on China’s inflationary rates. China, on the other hand, waits on our retail and consumer capacity numbers.

Today’s results and efforts in China brought European equities to a 7 month high. In the U.S., our own equities are pushing a limit. Where equities reach this high, debt spreads are looking much more solid.

Still Greece challenges the paradigm of economic strength. Through Greece, international banks are challenged on their sovereign debt exposure, certainly after agreeing to a 50% plus haircuts on the principle (voluntary). From there, a coupon rate for bond investors has reached a consensus of some 3.4%, on a real market rate of 9%.

But, when the European Central Bank will extend long term liquidity through their LTRO at a rate that creates arbitrage among sovereign debt, why not. Therein does reside risk, especially with Basil III. Let alone diversity among High Yield bonds. Sustainability is in banks’ diversification of portfolios.

For tomorrow, we must watch the weeks’ retail earnings. They start with 2-21 and Home Depot (HD), and the biggest….WALMART (WMT). Then comes Wednesday’s results for 2-22. Here we have Target, Safeway, Kohl’s. Then on Thursday we will see J.C. Penney.

In terms of economic indicators, they will include the very closely watched ICSC-Goldman Store Sales, and MBA Purchase applications (for mortgage home applications). On Thursday it’s jobless claims, petroleum reserves and natural gas reserves.

Internationally, we must look at Canadian retail sales, French CPI, German PMI for both manufacturing and services. Then, we must look at European Union PMI numbers that include manufacturing and services. What then is wrong with GDP numbers from Great Britain and Germany. Along with Italian retail?
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