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
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20
Facebook (FB) AI Mega-trend Tech Stocks Investing 2020 - 10th Feb 20
The US Constitution IS the Crisis - 10th Feb 20
Stock Market Correction Continues - 10th Feb 20
Useful Tips for Becoming a Better Man - 10th Feb 20
Will CoronaVirus Pandemic Trigger a Stocks Bear Market 2020? Part1 - 9th Feb 20
Could Silver Break-out like it did in 2011? - 9th Feb 20
The End of the Global Economy - 9th Feb 20
Fed to Stimulate in Any Crisis; Don’t Let Short-Term Events Bother You - 9th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Stock Markets See Patches of Blue Sky in Economic Recovery

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

By: PaddyPowerTrader

Economics

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
PaddyPowerTrader.com

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 http://www.MarketOracle.co.uk - 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