UBS: European Shock and Awe
- One day on from the Euro area's "shock and awe" plan to defend the Euro, and the Euro is trading around 1% above its lows. Real money accounts had expressed concern about the survival of the Euro - a concern which has been partly (but not entirely) tackled by the plan.
- The IMF said the plan is not a long terms solution to Europe's problems (fiscal union is a probable long term solution, which this plan may be a step towards). Lipsky described the IMF's contribution of EUR250bn as "hypothetical", suggesting an element of smoke and mirrors to the numbers.
- The UK still awaits the decision of Liberal leader Clegg as to who will form the next government. Brown resigned, not as Prime Minister (that would likely trigger David Cameron's appointment to the premiership), but as leader of the Labour Party.
- China's inflation rate came in a little higher than expected with a 2.8% yoy reading. We believe that the PBoC would like to interest rates, but that other areas of the government are opposed. Nonetheless, we expect to see tightening from June.