Incidentally, yes, the title is a play on the name of David Glasner's blog, Uneasy Money.
Of course, we knew coming in that the Fed is going to speak before Congress this morning-a big part of the market move was that anticipated event. In addition there are some signs that maybe something will be done to help Spain's banks-of course when discussing the EU and Germany one has to be cautious. However, two things seem to be changing the status quo just a little even for Germany.
For one thing Germany is becoming a lot more isolated politically particularly with the election of Francois Holande in France. Hollande has the Wall Street Journal editorial page all hot and bothered this morning by-the horror-actually making workers pensions more rather than less generous. Now we know the sky is falling.
This with the even more important dynamic that Germany is seeing first hand for itself how much peril there is in refusing to react until it's too late. It's been observed that Germany doesn't understand what it means to lead-basically you have to be a kind of "benevolent hegemon." In this sense the Germans need to hand out with us Americans a little more-we know all about the considerable skill in such a role-we wrote the book.
"While Berlin remains firm in its rejection of Spain's calls for Europe's rescue funds to lend directly to its banks, the officials said that if Madrid put in a formal aid request, funds could flow without it submitting to the kind of strict reform program agreed for Greece, Portugal and Ireland.
Instead, Spain would only have to agree to new conditions tied to the reform of its banking sector. Berlin is also exploring the possibility of funneling aid to Spain's Fund for Orderly Bank Restructuring rescue mechanism (FROB) to reinforce the message that it is the country's banks and not its public finances which are at the root of its problems."
"The evolving German stance on aid for Spain is the latest evidence that Chancellor Angela Merkel is adopting a more flexible approach to solving the euro zone's deepening debt crisis."
Interestingly in the photo of Ms Merkel in the above linked piece she even looks more friendly. The Germans have their good points. Maybe they can learn.
What was truly a major surprise to the upside was the announcement that China has eased-it cut it's rate by .25 percent. That was totally unexpected.
"China’s surprise 25 basis point cut in benchmark lending rates on Thursday caught economists and the markets by surprise, and could signal the economy is slowing faster than previously thought."
"Most analysts had expected China to keep interest rates unchanged and to cut the reserve requirement ratio (RRR) for banks instead, thus allowing them to lend more of their deposits. But the interest rate cut suggests industrial production data for the month of May, due on Saturday local time, will show a further deterioration in growth and an easing of inflation ."
Of course there's the rub. When market participants interepret a signal like that it offers two interpretations.
“The timing of tonight's rate cut suggests two things. Either inflation has eased to less than 3 percent already, or, growth is slowing sharply faster than policymakers' previous expectations,” Donna Kwok, economist for Greater China told CNBC."
So it can be read as either a bullish or a bearish signal. However, if you go by the Market Monetarist premise then you would have to suspect this is bullish as that was the first market reaction to the news-the futures spiked.
There was also good news in the labor market as initial claims dropped to 377,000 last week. Of course we'll see if it is later revised upward or downward-lately it's been upward, not a good thing.
Alas, in the time we're speaking here, it seems the market has started to moderate its gains as Bernanke did not say explicitly he would do more stimulus but that he would "monitor" events. Always so timid about overshooting.
A large part of yesterday's big move up was Janet Yellen's dovish words.
"Federal Reserve Chairman Ben Bernanke said the central bank is "prepared to take action" if needed to boost the U.S. economy, but made no specific commitment to more easing."
"Overall, the remarks offered little change from the statements he has made over recent months that more quantitative easing is possible but not certain and will depend on how growth occurs.
"The situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely," Bernanke said. "As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate."
"The stock market, which had been strongly higher previously, pared gains following a CNBC report on the prepared remarks."
"Recent data has indicated weakness in employment and production as well as factory orders and housing."
selloff since early May. Bernanke views the market as the delivery mechanism for the "wealth effect" he has trumped relative to Fed policy."
"Few in the market expected Bernanke to deliver a firm commitment Thursday to another round of quantitative easing, though remarks from San Francisco Fed President and Bernanke confidante Janet Yellen on Wednesday indicated the central bank is weighing a move."
"The Fed next meets on June 19-20."