China's GDP Soars 10.7%!
Daily Pfennig

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In This Issue..

* China has strong 4th QTR growth...                                     
* Time to let the renminbi gain VS the dollar...                                      
* Debt Ceiling is getting raised $1.9 Trillion...                                           
* Russian Central Bank is buying loonies...                                                                                                          

And Now... Today's Pfennig!

China's GDP Soars 10.7%!                                            

Good day... And a Tub Thumpin' Thursday to you! Another day of dollar strength, in this switch from risk assets to dollar denominated assets... Again, I question the mental giants behind all this, for the U.S. is what caused this problem... And now traders turn to the U.S.???? Oh well, sure seems like it would be different if I were in charge! Of course, a LOT of things would be different if I were in charge! But that's a discussion for another day!

Yesterday's Pfennig could set a record for the length, I think! So, I promise I won't go that long today!

Front and Center this morning, we have the news overnight from China that their 4th QTR GDP accelerated to the fastest level since 2007... Chinese GDP for the 4th QTR was +10.7%!!!!! Talk about "nailing" that call! The annual figure for China comes in at +8.7%, but in reality, who cares about the 1st QTR, when in the 4th and most recent quarter, growth was kicking tail and taking names later! In addition, China posted a higher consumer inflation figure than expected at +2%... And Retail Sales in China soared 16.9%! WOW!

Chinese officials are now contemplating how to go about slowing this economic engine down before it overheats, and is left in a heap on the side of the road with the hood up! Yes, they'll raise internal interest rates... They'll raise reserve requirements... But if they are really serious about putting a lid on inflation before it hits 3%, they'll look to the renminbi... I've said this over and over again and over again this dance is gonna be a drag... No wait! What I've said time and time again is that a strong currency can go a long way toward controlling inflation... So... If Chinese officials want to do something about this rising inflation before it gets out of hand, they should allow the renminbi to get stronger VS the dollar... Will they? Only the shadow knows...

So... In the past few months, China has taken over the title of biggest auto maker from the U.S.... They've taken over the title of biggest exporter from Germany... And... I thought that I had read a month ago that they had taken over the title of 2nd largest economy from Japan... But, as I read last night, that officially didn't happen, but is expected to happen this year...

All China needs now to be the Supreme Ruler of the World! HA! Is to overtake the U.S. as the number one economy...

Now... One would think that after printing strong reports like these in China, that commodities and commodity currencies would be latched on to the coattails of China and having a Big Party this morning... But NOOOOOOOOOOOOOO! That's not happening, for the grip that the Risk Aversion crowd has on the markets right now, is just too strong!

Here in the U.S. we've got some more fun to deal with, NOT! The Debt ceiling is getting raised again... This time it will be raised by $1.9 Trillion, to $14.29 Trillion... OH BOY! We're really packing away the debt these days aren't we?  Of course, long time readers know that I've banged on the U.S. Gov't, no matter who was in charge, for 8 years now, regarding the growing debt... But talk about accelerating in recent times... WOW!

You know... I've long been responsible and accountable for people in the workplace... I have never been interested in "who's to blame" over "how do we fix it?" I think the current people in charge could use a heaping helping of that way of working....

In other news here in the U.S. The Wall Street Journal is reporting that "the President is expected, today,  to propose new limits on the size and risk taken by the country's biggest banks, marking the administration's latest assault on Wall Street in what could mark a return -- at least in spirit -- to some of the curbs on finance put in place during the Great Depression."

Hmmm... I think the Gov't is playing with fire here... And you know what happens when you play with fire... You get burned! This is just like all the whining from lawmakers in recent days about how the banks are to blame for not lending money... Hmmm... Of course it was the same lawmakers last year that beat the banks to a pulp for lending money! The lawmakers made rules about lending, and so on... And now... With 17% unemployment, 1 out of 5 homes under water, they want banks to make loans... To whom? Hey! If the qualify, I'm sure they can get a loan! But, given the new parameters, that the Gov't set in place, not many are qualifying... So... You see... The lawmakers played with fire... And now, they're getting burned!

OK... Let's go on to other things on this Tub Thumpin' Thursday!

The Greek Finance Minister is shouting from the rooftops this morning that the European Union/ Germany is not preparing a loan to help Greece's budget deficit. The Fin Min said he doesn't expect anyone to come to the rescue!

Well... Buddy... I'm afraid that if Germany doesn't come to the rescue, that you will go down in flames...

Eurozone Manufacturing reported this morning that manufacturing in January is sliding, unexpectedly, which if it comes to fruition, would have a huge impact on the Eurozone's nascent economic recovery...

Hey! Remember when I told you that Russia was talking about diversifying their currency reserves into Canadian dollars? Well... It looks like they followed up on that "talk"! A reader sent me the story that appeared in the Financial Times.... Here's a snippet...

"Russia's central bank announced on Wednesday that it had started buying Canadian dollars and securities in a bid to diversify its foreign exchange reserves.

Analysts said the move could be a sign of increased diversification of emerging market central bank assets away from the dollar and into investments denominated in other commodity-linked currencies, such as the Australian dollar."

And then there was this quote by Adam Cole at RBC who said... "if taken in isolation, Russia's announcement that it was buying Canadian dollars was not significant, but if it was part of a broader trend, then it was an important step. If it is a barometer for the activity of other central banks, then its is structurally positive for the currencies of countries like Canada and Australia that have a commodity bias in their economies."

Couldn't have said it better myself! Although, that's the message I've given you for years now!

The data cupboard will bring us the latest leading indicators today, which should point to more improvement in the economy. It's Thursday, so that means the Weekly Initial Jobless Claims are on the docket, along with the Philly Fed Survey, which is a report on the pulse of Business conditions, for the Philly region... 

To recap... Chinese economic growth for the 4th QTR hit 10.7%! Retail Sales soared, and with all that economic activity, so did inflation. The Risk Aversion crowd is still in control of the currency markets, which means the dollar is on top of the world right now... Of course it's still down VS the euro, which stands at 1.40 and change this morning!

Currencies today 1/21/10: American Style: A$ .9075, kiwi .7155, C$ .9515, euro 1.4045, sterling 1.6130, Swiss .9545, European Style: rand 7.57, krone 5.8130, SEK 7.2380, forint 193.65, zloty 2.90, koruna 18.5250, RUB 29.84, yen 91.70, sing 1.4045, HKD 7.7695, INR 46.06, China 6.8269, pesos 12.77, BRL 1.7945, dollar index 78.75, Oil $77.67, 10-yr 3.38%, Silver $17.64, and Gold.... $1,102.80

That's it for today... See? I told you I wouldn't go as long as yesterday! Day one of the "lady of the house" being gone has started, which means, I'll be making breakfast for my little buddy, Alex, as soon as I hit the "send button", and his lunch, and then taking him to school before I head into work... I watched some of our Blues game from Montreal last night, as they won in OT, not that I saw that, as it came late... But all the while, watching the game I couldn't get out of my head that I HAVE to go back to Montreal this year, even though I said to myself after my first visit there, that I would never go back! OK... The monsoon like rains I talked about yesterday, began... And a Fog is hanging over the region like I've never seen last so long before... I keep waiting to hear that the Wolf man is loose! Oh look they made a movie about the wolf man that's out now! HA! OK... Hit send Chuck, and get going.... OK, I will! I hope you have a really good Tub Thumpin' Thursday!

Chuck Butler
EverBank World Markets

Posted 01-21-2010 10:43 AM by Chuck Butler