The Market Sentiment
Global Economics Weekly Brief
Recent improvements in the market sentiment were given a reality check last week. The underlying fragility of the Eurozone was exposed as Italians voted en masse for comedian Beppe Grillo’s protest party, the Five Star Movement. The result made clear Italians’ dislike of the current austerity and reform programme and a disenchantment with the political establishment.
There were no laughs or positive sentiment at the White House as President Obama signed into law spending cuts of $1.2trn over 10 years. Failure by politicians to find a compromise solution to deal with the rising debt isn’t good news for the US economy, especially when the recovery is just starting to take root. Is this the reality moment?
What is "market sentiment"?
Doctor’s Sentiment Report: UK GDP slightly less bad. The second estimate of UK GDP for the final quarter of 2012 was unchanged at -0.3%q/q. However, revisions to earlier data mean that the UK economy actually grew last year, albeit by just 0.2%. It's probably more honest to describe this performance as ‘less bad’ rather than ‘better'. Excluding oil and gas extraction which is not only in structural decline, but had a particularly poor year, the economy is estimated to have grown by 0.4%. The data also confirmed a very poor year for the manufacturing sector as the economy struggles to rebalance.
Nationwide house prices creeping up! Really! Now there is positive market sentiment! The Bank of England’s Funding for Lending Scheme might just be starting to have a positive impact. UK Nationwide house prices posted their second successive monthly increase in February and their fourth in the last five months. But London and the South West remain the only regions where prices are above their 2010 level. The Council of Mortgage Lenders also indicated more signs of life in the housing market as 2012 saw the highest number of first-time buyer mortgages since 2007. But before getting too excited, this was still 40% lower than back then.
Demand for credit an acquired taste. Demand for credit fell in January as households continued to pay down debt. Outstanding credit card debt has now been falling steadily since 2011. For loans and overdrafts this run stretches back to 2009. At the same time, the total amount of outstanding loans to UK non-financial corporation's rose for just the second time since March 2010. But with outstanding corporate balances still 27% below their peak, it’s not time to celebrate yet. More news on the way on higher credit borrowing to stay afloat!
Revealed: The £612 billion debts the UK Government of Labour has hidden and now continued by the present Conservative/Lib/Lab coalition.
Amid disastrous growth figures, taxpayers are liable for a back door spending spree buried in the official accounts of the last UK Labour Government. All debts hidden off the Balance Sheet of the UK.
Concealed schemes keep billions out of view.
Remote Contingent Liabilities = £377.6 billion
Private Finance Initiative = £144.6 billion
Contingent Liabilities = £49.5 billion
New Schemes = £40 billion
Total = £611.7 billion. What is the future for the UK government to pay this money back?
Italians reject austerity and reform. Negative market sentiment in Italy, very negative... Last week’s Italian elections resulted in a deadlock as the centre-left party and its allies won the lower house but failed to secure a majority in the Senate. Control of both houses is needed to govern and continue to push through the reforms necessary to keep financial markets quiet and get Italy out of a severe recession. Former Prime Minister Silvio Berlusconi made another comeback, but the real surprise came from the Five Star Movement led by comedian Beppe Grillo which secured the highest share of votes. The protest movement attracted a majority among young Italians who are clearly against austerity. With youth unemployment at nearly 39%, it’s easy to understand why. Italy are in `very deep` financial trouble and the future is more unemployment and yes, there will be more austerity and reform whoever wins power!
Two steps forward, one step back. Revised data showed that the US economy did in fact manage to eke out some growth in the final quarter of last year. The 0.1% gain was up from the initial estimate of a -0.1% contraction. The US equivalent of the Purchasing Managers Index (PMI) hit its highest reading since June 2011 providing another sign that the US recovery is gaining traction. But life isn’t easy and almost as if right on cue, US politicians failed to find a compromise agreement on dealing with the county’s rising debt. So $1.2trn of spending cuts are to be implemented over 10 years. It’s estimated that the $85bn of cuts to be imposed this year could cost up to 750k jobs and cut growth by 0.6%. More unemployment on its way and further high debts of more than $16 trillion and growing daily!
Contrasts in global manufacturing. Yet market sentiment is up on the investment floors? Unlike the rise in US manufacturing activity, the UK PMI surprised in February, falling to 47.9, from 50.5. Though output across the Eurozone as a whole continues to contract, there are signs that Germany might be dragging itself out of the mire as its PMI reading moved into expansion territory for the first time in a year. China also stuttered in February. But with Chinese New Year celebrations falling in the month, these data are difficult to interpret.
Is Japan's policy revolution about to gather pace? The Japanese government announced that Harukiko Kuroda will be the new governor of the country's central bank. Of the candidates he was considered to be the one who would pursue the country's new 2% inflation target with the most vigour. And with almost perfect timing, Japan's inflation reading for January underscored the challenge facing the new governor. The headline CPI reading fell 0.4% y/y. Never mind 2% - it has now been over four years since the inflation was above 0.5%!
Global Economic Crisis
The Market Sentiment Globally
The current financial crisis is the worst the world has seen since the Great Depression of the 1930s. For younger generations, accustomed to mild recessions of the new phase of globalization, the misery of the Great Depression is hitherto nothing more than a distant legend. However, the collapse of two Bear Stearns Hedge funds in summer of 2007 exposed what came to be known as the subprime mortgage crisis, reintroducing the world to an era of bank failures, a credit crunch, private defaults and massive layoffs. In the new, globalized world of closely interdependent economies, the crisis affected almost every part of the world, receiving extensive coverage in the international media. “In an Interconnected World, American Homeowner Woes Can Be Felt from Beijing to Rio de Janeiro,” observed the International Herald Tribune at the onset of the crisis. “Chinese Steelmakers Shiver, Indian Miners Catch Flu,” noted the Hindustan Times. “US and China Must Tame Imbalances Together,” suggested Yale Global, as the frenzied search for a solution continues around the globe. Global greed to expand at any cost is the major issue.
In this special report, Yale Global offers essential information on why the crisis started, how it affected the industries and consumers around the world, and what solutions have been proposed by experts and regulators across countries. Click on each title below for comprehensive information.
Causes of the Crisis
What exactly caused the crash
Evolution, Effects and Response
The worst crisis since the Great Depression
Solutions for the future
World Economic Outlook (WEO)
Coping with High Debt and Sluggish Growth - http://www.imf.org/external/pubs/ft/weo/2012/02/pdf/text.pdf
The World Economic Outlook (WEO) assesses the prospects for the global recovery in light of such risks as the ongoing euro area crisis and the "fiscal cliff" facing U.S. policymakers. Reducing the risks to the medium-term outlook implies reducing public debt in the major advanced economies, and Chapter 3 explores 100 years of history of dealing with public debt overhangs. In emerging market and developing economies, activity has been slowed by policy tightening in response to capacity constraints, weaker demand from advanced economies, and country-specific factors, but policy improvements have raised these economies' resilience to shocks, an issue explored in depth in Chapter 4.
Plus, the `Global Risks 2013 Report - Risk Cases and Resilience` - contact us today....
Global economic outlook for 2013 revealed - United Nations ...
10-Step Double-Dip Recession Survival Guide for Entrepreneurs - click on the connection below for comprehensive information.
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Note: About the Author Colin Thompson
Colin is a former successful Managing Director of Transactional/Print Manufacturing Plants, Print Management/Workflow Solutions companies and other organisations, former Group Chairman of the Academy for Chief Executives and Non-Executive Director, helping companies raise their `bottom-line` and `increase cash flow`. Plus, helping individuals to be successful in business and life in general. Author of several publications, research reports, guides, business and educational models on CD-ROM's/Software and over 400 articles published on business and educational subjects worldwide. International Speaker and Visiting University Professor.
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The Central Banker Problems!
Market sentiment is the key!