Stimulus Hopes Drive Commodities Rebound; U.S. Tightens

Bloomberg: Copper Stockpiles in China Surge to Record as Metal Flows East

Copper has gained 4 percent this year in London amid a surge in metals prices on expectations that China may introduce a new round of stimulus to bolster the slowing economy.

Stimulus efforts have failed for the past two years. Will China risk a stimulus with first-tier housing prices already rising at a bubble pace?

Meanwhile, even if China would like to do stimulus, the deflation working the global economy will grow stronger as the U.S. tightens controls on banks, and become a full blown depression if the U.S. initiates a negative interest rate policy.

Bloomberg: Fed Plans Second Effort at Limiting Banks' Ties to One Another

The Federal Reserve is set to re-propose long-delayed rules for limiting business ties between Wall Street firms such as JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc., aiming to ensure megabanks won’t take others with them if they fail.

The measure to be voted on at a meeting in Washington on Friday represents a second try after Fed governors abandoned a 2011 proposal to restrict banks’ credit exposure to any other financial firm to 10 percent of capital. That original proposal, much tougher than a 25 percent restriction called for in the 2010 Dodd-Frank Act, was shelved after receiving strong criticism from the banking industry.

JPMorgan, Citigroup and Morgan Stanley argued that the earlier proposal overstated risk and would hold back the economy. Goldman Sachs more specifically warned that it could destroy 300,000 jobs. The Bank of Japan said a similar rule affecting foreign firms could hurt liquidity of high-quality sovereign debt.

Banks grow the money supply. Restrict banks and global money supply growth slows. Meanwhile,

Reuters: U.S. payrolls surge, boost Fed rate hike prospects

The employment report added to data such as consumer and business spending, in suggesting the economy had regained momentum after growth slowed to a 1.0 percent annual rate in the fourth quarter. Growth estimates for the first quarter are around a 2.5 percent rate.

Business spending is a leading indicator, but consumer and employment data are lagging indicators.