• Few specifics on public/private partnership to absorb bad loans. Plan still in the works: Geithner
  • Equities slide on lack of specificity; markets expected concrete proposal, not theoretical framework
  • German finance minister: Speculation on eurozone stability is absurd; spreads narrowing between best and worst sovereign credits.
  • EU places 25% tariff on Chinese steel rods
  • Almunia: Different rules for toxic assets needed by different countries but common framework needed
  • US chip giant announces $7 bln investment in plant and equipment in US, to hire 7,000.
  • US whole sale inventories fall 1.4%, sales fall 3.6%
  • Geithner reiterates strong dollar policy, says has not made determination that China is manipulating currency
  • Bernanke: Encouraged by progress of credit facilities
  • IBD/TIPP dips to 44.6 in February from 45.4 to in January.
  • Stimulus plan passes Senate by 61*37. 3 Republicans joined the Democrats
  • Stocks fell over 5% intraday, ending slightly above lows. 10-year note yields fell 15 bp to 2.84%

Reflation turned into deflation, at least of market prices, shortly after Treasury Seretary Geithner unveiled what turned out to be a very broad framework to reform the financial system. The market expected there to be much more meat on those bones and set about sending share prices and bond yields much lower which in turn sent risk aversion soaring in the currency markets.

EUR/USD fell sharply, falling from the 1.3070/75 area to lows of 1.2835 before stabilizing. Stop loss selling was heavy below 1.2940, 1.2880 (where central banks were buyers early in the day) and 1.2850.

GBP’s recent topside run ran out of steam today even before risk aversion accelerated after Geithner. The failure to overcome 1.5000 yesterday prompted many to book profits while a technical reversal in EUR/GBP played out.

USD/JPY was entirely beholden to the state of the market’s risk appetite at any given point in time. Appetites were healthy pre-Geithner and non-existent after. USD/JPY slipped from 91.50 to 90.10 as the markets deteriorated.