This week is certainly a week for a raft of economic data to be released indicating the health of the Global economy and whether we can expect an improvement or not. ZeroHedge recently reported on a lot of negative headlines regarding global trade and with Spain’s dismal bond auction after LTRO’s have stopped doesn’t bode well. Does this point to a global collapse or more aggressive money printing to come? Recent history has always shown us that ultimately CTRL+P is the CB’s only weapon and that can’t end well.
The weakness in the markets started late last night when Australia posted a surprising second consecutive deficit of $480MM on expectations of a $1.1 billion surplus (with the previous deficit revised even higher). This is obviously quite troubling because as we pointed out 3 weeks ago when recounting the biggest Chinese trade deficit since 1989 we asked readers to “observe the following sequence of very recent headlines: “Japan trade deficit hits record“, “Australia Records First Trade Deficit in 11 Months on 8% Plunge in Exports“, “Brazil Posts First Monthly Trade Deficit in 12 Months ” then of course this: “[US] Trade deficit hits 3-year record imbalance“, and finally, as of late last night, we get the following stunning headline: “China Has Biggest Trade Shortfall Since 1989 on Europe Turmoil.” So who is exporting? Nobody knows, but everyone knows why the Aussie dollar plunged on the headline. The shock sent reverberations across Asian markets, which then spilled over into Europe. Things in Europe went from bad to worse, after Germany reported its February factory orders rose a modest 0.3% on expectations of a solid 1.5% rebound from the -1.8% drop in January. But the straw on the camel’s back was Spain trying to raise €3.5 billion in bonds outside of the LTRO’s maturity, where the results confirmed that it will be a long, hard summer for the Iberian country, which not only raised far less, or €2.6 billion, but the internals were quite atrocious, blowing up the entire Spanish bond curve, and sending Spanish CDS to the widest in over half a year.