12 Jan 2012: Chinese inflation dips again

FTSE 100 5674 Up 5bp
S&P 500 1292 Up 3bp
NIFTY 50 India 4844 Down 34bp

Major Stories

  • China’s consumer inflation falls again
    • Chinese inflation fell again in December, prompting cautious policy loosening to support the slowing economy
    • This was the 5th consecutive month of falling inflation
    • The dip in inflation was moderate in December but seasonal factors account for this- Chinese New Year falls earlier than usual this year, causing food prices to be inflated
    • Beijing has trimmed the minimum bank reserves to introduce more liquidity into the economy
  • Oil Refiners sever ties with Iran
    • Several European oil refiners have begun to sever spot-purchase ties with Iran
    • They are still honouring earlier contracts, but have refused to sign new contracts or engage in spot-purchases
    • US are set to penalise institutions dealing with Iran in oil trade- many Banks, as a result, have stepped back from buying crude oil from Iran
    • Oil prices have once again surpassed $110/barrel
  • Hedge Funds look to profit from Greece
    • Hedge Funds in NY and London are looking to profit from trading Greek govt bonds; at the same time, Banks face losses arising from debt swaps
    • The Greek Govt is lobbying investors into accepting a voluntary swap that might result in big losses; most hedge funds will not accept this swap. These funds say if they do not receive payments, they will trigger the Credit-default-swap which will result in as much as 50% losses for banks from these bonds

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