Libya Fighting Calms Down as Stocks Around the World Rally

After yesterday`s important events were accounted for, markets looked to regain the bullish mood once again. The fall in U.S. home prices has not had a perceptible negative impact overseas, nor was the response in the U.S. strong enough to necessitate a reconsideration of long-term viewpoints. Perhaps traders are pleased that with the pressure on consumer net-worth exerted by falling house prices remaining in place, the Fed will be unwilling to adopt any radical measures to curtail speculative activity indirectly, or to fight inflation risk.

In the Middle East, a little bit of a stalemate is in place after the events of the past few days, and it is reported that while loyalist forces are too afraid to launch an open assault on rebels, due to Coalition airstrikes, the rebels remain too weak in terms of equipment and training to stage a major offensive against their enemies. Leaders of the Coalition against Colonel Gaddafi are worried about such a stalemate becoming entrenched, and there is increasing talk of arming the rebels coming from both sides of the Atlantic. In Syria, President Basshar Assad is expected to give a speech outlining his reform proposals, but it remains unclear how serious he is. His own supporters staged large demonstrations in support of the regime in many cities yesterday, and it looks like the rule of the Assad family is in no risk of a quick collapse anytime soon. Oil prices remain stable in response to these developments, with WTI a little lower, while Brent crude is slightly more expensive than yesterday.

In Asia, we are especially interested in reports of the new "copper as collateral" paradigm shaping the Chinese bubble, where it is reported that companies exploit latencies in supply and delivery of copper stocks in order to finance speculation. The article in the Financial Times blog is certainly worth a read for anyone curious about how the greatest bubble in the history of mankind is developing. While there is no sign yet that the game will be over soon, we believe that the PBOC and the Chinese Communist Party are committing a fatal mistake by refusing to restrain the creativity of China`s speculators more aggressively. It is especially worrying, and strange, that no precautions are being taken to prevent the diversified techniques of financial "innovators" in the country, in light of the fact that their deeds are counteracting the goverment`s tightening measures..

Stocks around the world are higher before U.S. open, while risk sentiment among currency traders is somewhat more mixed. News of an apocalyptic tone continue to come from Japan, and no end to the crisis appears to be in sight. Attention is focused on tomorrow`s NFP release, where anything less than a solidly bullish number indicating an employment gain in the 200k range will be regarded as a disappointment, although the short term price reaction remains as unpredictable as ever.