Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter


Stock Markets See Patches of Blue Sky in Economic Recovery

Economics / Recession 2008 - 2010 May 05, 2009 - 08:50 AM GMT

By: PaddyPowerTrader


Best Financial Markets Analysis ArticleSo much for the great recession. The improvement in risk appetite has continued unabated into this week. Firmer US housing data, construction spend and Chinese PMI numbers (which rose for the first time in 9 months), combined with declining bank worries and easing swine flu concerns boosted risk appetite. To top that off, Research In Motion and Intel were upgraded and Sprint Nextel earnings beat estimates. But it appears to this writer that euphoria has got the better of common sense.

Today’s Market Moving Stories

  • About 10 of the 19 largest U.S. banks being stress tested will be instructed by regulators to raise more capital, according to a source familiar with official talks. U.S. federal regulators are projecting losses of up to 12% on commercial real-estate loans over two years at the large banks that are undergoing stress tests. The regulators are likely to cite these loans as a major reason for why some of the large banks need additional capital.
  • More talk of Green Shoots. The Swiss National Bank sees indications that the global economic downturn is slowing and the economy may be approaching a turning point, Vice-Chairman Philipp Hildebrand said. “It’s correct that the economic data still point to a decline in economic activity, but they indicate a slower decline.” Hildebrand also said the SNB was taking deflation risks very seriously and had to use currency interventions to fend off deflation as interest rates were at zero. Can you talk your way out of a recession?
  • In the UK, the CBI reported that small and medium size businesses saw output and orders fall at the fastest rate in the twenty year history of the survey in Q1 09. In common with other cautious signs of relative optimism, respondents are hoping for a less dramatic decline over the next quarter. The European Commission has updated its forecasts, and now sees UK GDP at -3.8% in 2009 and +0.1% in 2010, significantly more downbeat than the Government (especially for next year), but very much in line with market consensus.
  • Chinese press reports focus on a statement made by the State Information Centre yesterday which suggested growth will accelerate to 7% in Q2 but that it is too early to say the economy has turned a corner.
  • The vote in the Czech Senate on the Lisbon Treaty is scheduled for tomorrow, and the latest signs are that the vote will be yes.
  • The US April Senior Loan Officer Survey showed that the vast majority of banks expect deterioration in credit quality for all types of loans. Credit standards for corporate loans were tightened further, though at a less aggressive pace. The net tightening increased for mortgage lending, while it was about stable or eased somewhat for consumer credit.
  • In health news, Mexican health officials said the latest flu reports suggest the worst is over. “The admittance of patients to hospitals has decreased and the health of patients in hospitals has improved,” Mexican Health Minister Jose Angel Cordova said. Nonetheless, the World Health Organization prepared to raise the pandemic threat level to its maximum of six. The WHO warned that the virus could lie dormant and still mount a comeback. The WHO also reported its case tally had reached 898.
  • Dankse Bank released Q1 results this morning, including results from National Irish Bank, the group’s operations in the Rep of Ireland. The Irish results reflect a significant increase in bad debt charges. Dankse said the outlook for Ireland and the Baltic region is particularly bleak.
  • Better news for Fyffes. Chiquita reported Q1 results that were ahead of forecasts and shares rose over 10% since Friday. The company’s salad division was a key driver of outperformance but it also remarked that European bananas had seen positive price action at the end of the first quarter.
  • With Crude Oil, Gold (more Chinese buying?) and Copper on the up, expect the likes of BHP Billiton, Anglo American and Xstrata to attract interest today. Sharply to the downside this morning are Adidas, Alcatel Lucent and Metro all on disappointing earnings news. Infineon may gain from an upgrade to overweight by JP Morgan.

The Futures So Bright I Gotta Wear Shades
The rally in equity markets has been particularly sharp, with the S&P 500 up over 30% from its low and the index now in positive territory for the year. Commodity prices appear to have joined the party, with the unweighted CRB index up around 7% from a week ago. So what now? Well expect a deluge of the annual “sell in May and go away” clichéd stories. Mind you with the averages where they are, a lot of the pros are looking to take some money off the table as fundamental support for a protracted period of strong equity returns is missing. Economic and earnings growth rates are likely to be subdued for considerably longer. To get from green shoots to a sustainable economic expansion requires two things to happen. First, a pick-up in capital formation (capital expenditure, construction and spending on consumer durables). But de-leveraging and exceptional balance sheet repairs mean we face increases in savings and unemployment outside normal experience. Secondly, the attainment of financial stability is needed; as yet, it remains a work-in-progress.

The days ahead may be less rosy and are littered with potential time bombs, with several key data releases. The key release will be the US April jobs report on Friday. Historically, the worst quarter of economic growth is usually followed in the next quarter with the biggest job losses. We are in the midst of an inventory restock and stock prices are fully tracking it. It can go on for a while longer. But the end of the rally isn’t that far ahead.

ECB And Stress Test Speculation Ends This Week
This week will extinguish a few sources of uncertainty. The speculation surrounding what unconventional measures the ECB will implement should be answered by Trichet at this Thursday’s governing council press conference, which will follow a probable 25bp interest rate cut. Possible measures range from buying CPs or corporate bonds, thus bypassing the banks and effectively going straight to the borrower, to extending the refinancing term out to 1-year or even beyond. Even buying of covered bonds cannot be discounted, which would jump-start a largely lifeless market into action. I do not think the Bank will embark on more traditional Quantitative Easing of sovereign bonds due to the political complexities, amongst other obstacles. Of course, there is a chance the ECB disappoints the market by not committing to the aggressive measure of outright purchases, thus denting recovery hopes in the process. For this reason, the general sovereign spreads tightening move may momentarily take a backward step as a result.

The result of US stress tests is other main source of uncertainty this week due on 7 May. With analysts jittery ahead of the announcement, the market may find some confidence once the news is known. The US earnings season is ongoing, but the main headline grabbing news should now come from the European banking results. The likes of BNPP, Socgen and Commerzbank will make announcements during the remainder of the week. The results come ahead of the German bank plan, which is due to be announced on 13 May. Naked Capitalism gives a critical assessment of the way the stress tests are handled, about the persistent delay in publishing the results and the various leaks.

Data Today
In the US April’s non-manufacturing ISM is released at 14:00. Service-sector activity should shrink at a slower rate with the PMI improving to 4.

And Finally… Obama Budget Cuts Visualisation

Disclosures = None

By The Mole

The Mole is a man in the know. I don’t trade for a living, but instead work for a well-known Irish institution, heading a desk that regularly trades over €100 million a day. I aim to provide top quality, up-to-date and relevant market news and data, so that traders can make more informed decisions”.

© 2009 Copyright PaddyPowerTrader - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

PaddyPowerTrader Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules