The euro has continued to bleed against the U.S. dollar, hitting lows not seen since about May. The Hang Seng is down over 2%, while the Nikkei has shed more than a per cent.
Yet mainland Chinese stocks are rising, with the Shanghai Composite up a per cent. Europe is also showing some small gains. Perhaps they’re the first to realise that Bernanke’s early steps towards tightening monetary policy are an indication that he thinks the economic recovery has legs. Inflation isn’t threatening him yet, so that can’t be the reason since while yesterday’s PPI was higher than expected, it merely removed deflation as a threat rather than signal ling substantial inflation.
Let’s not forget that the Conference Board’s Leading Economic Indicator index continues to be strong, and we had a larger than expected decline of distillate inventories in the U.S. reported yesterday. This is an early tightening step due to the fact that some degree of a sustainable recovery has taken hold.