There appears to be across the board losses in Asian equity markets with Chinese markets being down more than 1%. I am not sure of the reason, however, the declines are probably linked to inflation in China and increasing interest rates. I find it interesting that China has raised interest rates twice in a very short period of time to combat inflation, however the government will not allow the free float of the Yuan, which is a proven method to fight inflation. Higher interest rates as well as a free float currency will hurt Chinese export companies.
The recent news in the US about the shaky municipal bond market is well worth noting because the end result will be higher state and local taxes. Many folks do not pay much attention this form of public financing. I have noticed a sharp rise in interest rates for municipal bonds as investors perceive higher risk associated with these securities. There might also be competition between Federal and state/local financing needs. The Feds might be crowing out other public financing needs because of the huge budget deficit.
All in all, I still see mixed economic signals for 2011 although economic conditions have improved a bit.
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