Today's Key News - China Heat May Burn

Major U.S. equity indices are lower this morning but showing some built up resistance to troubling Asian news. However, your favorite independent equity research provider thinks the big hit is yet to come. We anticipate China's reactionary response could include a sharp hike of interest rates that we expect will shock investors into a second sharp global sell-off. Wall Street Greek is not limited by corporate layers or tempered by job insecurity, and is thus not afraid to go out on a limb versus just describing your current weather.

Asia:
Hang Seng Index -2.3%; Shanghai/Shenzhen CSI 300 -4.67%; NIKKEI 225 -1.7%; S&P/ASX 200 -1.15%; Taiwan TAIEX -1.4%; BSE SENSEX 30 -0.38%; KRX 100 -1.5%; Ho Chi Minh -0.3%

U.K., Europe & Middle East:
DJ STOXX 50 Index -0.72%; FTSE 100 -0.48%; CAC 40 -0.68%; DAX -1.15%; Russian RTS Index -1.98%; ASE General -0.59%; Tel Aviv 25 -0.4%; Tadawul All Share NA; DFM General +0.02%

• *** China tops the headlines today, as first quarter economic growth rocketed 11.1% higher, beating expectations for a 10.4% rise. This ignited concern that the reactive Chinese government might move to curb inflation by raising rates. March CPI in China rose at a 3.3% annual rate, above the government's red flag threshold of 3.0%. A rate hike of sharp proportion seems imminent to us, and the recent surge of Chinese mainland shares and volatility this year, increase the potential for another sharp correction that Wall Street Greek believes would be exacerbated by the government move to cut rates. We anticipate the degree of rate cut will be more than a moderate one this time around. Wall Street Greek is making its second prediction for a China meltdown, and last time we caught it two days ahead of time. Although global markets could prove more resistant in the short term, we anticipate they will eventually be impacted by the Chinese government's moves. Also, Q1 GDP is reported later this month for the U.S., but we view persistent inflation threatening to equities despite the health or weakness of the report.
• *** Global markets are showing signs of the beginning of impact, led by Asian shares lower today.
• *** While jobless claims came in slightly lower than the week prior, they were high enough last week to take the four-week moving average up. The service sector played a role this month, which we find concerning. However, we expect weakness mortgage lending and the end of the tax season to drive near term employment impact to services. Wall Street Greek anticipates next month's employment situation report will show a rise in unemployment to 4.5%, after reaching 4.4% this month.
• *** Earnings season gets busy today, as many of America's great corporations report results. Merrill Lynch (MER) exceeded estimates, as did Bank of America (BAC), while Altria Group (MO) disappointed today.

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