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Papandreou Changes His Mind: Dave's Daily



Clearly, Germany has more skin in the eurozone fix than any other nation. Merkel likely had an unpleasant and direct conversation with Papandreou convincing him his referendum gambit was a mistake. While she wins the argument, the German people no doubt will lose the most given their obligations. The IMF is also rumored to be making some contributions to the EU, and that my fellow citizens, would involve American taxpayers.

Making things more euro-centric Thursday the ECB surprisingly cut interest rates from 1.50% to 1.25% citing poor economic conditions. Eurozone inflation is running hot at the moment but new ECB head Mario Draghi (sounding Bernanke-like) stated this was "transitory". The G-20 summit is underway and who knows what if anything will come of it.

Back in the U.S. jobless claims were better than expected at 397K vs consensus at 400K with prior claims revised higher once again at 406K vs 402K. This has been the consistent trend with revisions always moving previous data higher but making for a better headline now. Factory Orders were higher at .3% vs .1% previously. Productivity data was also better at 3.1% vs previous -.1% but Unit Labor Costs were -2.4% vs 2.8% previously which is good for the employer vs the worker. ISM non-Mfg data was a little worse at 52.9 vs 53 previous.

News of Papandreou's reversal helped markets rally overseas and in the U.S. on this and economic data. Stocks in the U.S. are poised with a good unemployment report Friday to reverse the week's large losses. No folks, you can't make this stuff up really!

Gold and silver prices zoomed higher once again as easy global monetary policies are assumed to be inflationary no matter what authorities would have you believe. The dollar was weaker once again on news of another "fix" while commodity prices (base metals, energy, grains and so forth) overall were higher. Bond prices once again declined slightly with the stock rally.

The stock market rally was led by some euro zone relief for financials (XLF) but which remain negative overall. Also leading the averages higher were tech (XLK) and frankly most other sectors including retail (XRT). Let's remember, correlations have never been this high from sector to sector.

Volume was strong on Thursday and breadth per the WSJ was quite positive.

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