Archive for category Trading Markets
Consumer Spending in U.S. Rises More Than Forecast
Posted by Tetyana Matychak in Favourites, Trading Markets on August 30th, 2010
Consumer spending in the U.S. rose more than forecast in July, exceeding gains in incomes, a sign the improvement will not last without more jobs.
Purchases rose 0.4 percent, the most since March, after little change the prior month, Commerce Department figures showed today in Washington. Incomes climbed 0.2 percent, less than projected, and the savings rate dropped.
Disposable incomes, or the money left over after taxes, dropped for the first time since January after adjusting for inflation, showing the lack of jobs is hurting Americans’ spending power. Companies from Intel Corp. to J. Crew Group Inc. are cutting forecasts as unemployment and flagging confidence prompt households to scale back.
“This, so far, is allaying near-term double-dip concerns,” said Derek Holt, an economist at Scotia Capital Inc. in Toronto, referring to fears the world’s largest economy will tip back into a recession. “It nonetheless showcases very lackluster growth in the U.S. economy.”
Stock-index futures fell after the report, extending earlier losses, and Treasury securities rose. The contract of the Standard & Poor’s 500 Index was fell 0.3 percent to 1,060.3 at 8:54 a.m. in New York. The yield on the benchmark 10-year Treasury note dropped to 2.60 percent from 2.65 percent late on Aug. 27. Read the rest of this entry »
Is Company Guidance Worth Listening To?
Posted by Tetyana Matychak in Trading Markets on August 26th, 2010
Yesterday I wrote a post titled “Q2 earnings scorecard — believe the guidance or believe the bears?” The point of that post was that forward guidance during the most recent earnings season closely matched the guidance offered during the previous earnings season and that, based on these fairly positive expectations of company management, it was unlikely that the economy was heading for a double dip.
It immediately afterward occurred to me that it might be worthwhile to test the hypothesis that Upside guidance actually results in increased earnings.
In Q1 of 2010, roughly 20% of the companies that offered any guidance at all provided Upside guidance. Here are the Q2 results for this optimistic set of companies:
77% did actually deliver increased earnings
2% delivered no increase
21% showed a decrease in earnings
93% showed year-over-year top-line growth
7% saw a decrease in revenues
Companies that offer Inline or Mixed guidance usually see their stock price slammed during earnings season. Do they deserve it? Read the rest of this entry »
What Lies Behind ‘Disappointing’ US Economic Data?
Posted by Tetyana Matychak in Trading Markets on June 9th, 2010
Larry Summers, Director of the White House National Economic Council, has called for a new ‘mini-stimulus’ of $200 billion to attempt to pull the US economy out what he terms its ‘very deep valley’. Summers’ was clearly a response to ‘disappointing’ trends revealed in the the latest US economic data. Similar concerns lay behind the call of US Treasury Secretary Geithner, in the run up to the G20 summit, for Europe and Japan to do more to boost demand.
Certainly recent US data confirms the limited character of US economic recovery from the Great Recession. As widely reported, the overwhelming majority of new US jobs created in May were temporary ones for conducting the census – private sector job creation fell to its lowest level since January. US housing sales in key regions have fallen by 25-30% following the expiry of the government tax credit scheme. House prices, on the S&P Case-Schiller index, have been declining since last September. The revised 1st quarter 2010 US GDP figures lowered the estimate of economic growth in that quarter from an annualised 3.2% in the first estimate to 3.0% in the latest – both are a major deceleration from the 5.6% recorded in the 4th quarter of 2009.
Summers and Geithner’s concern is therefore clearly justified. US economic growth is losing momentum at a point in the business cycle, that of an early stage of recovery, when acceleration might have been anticipated. Overall US GDP is still 1.2% below its peak level of the 2nd quarter of 2008 – meaning that not only is this recession the deepest in post-World War II US economic history but recovery is also the slowest. Read the rest of this entry »
Why it makes sense to fear Greek default
Posted by Tetyana Matychak in Favourites, Trading Markets on May 18th, 2010
Is everybody overstating the consequences of a Greek default and/or devaluation? The Economist points out that Europe has seen quite a few defaults in recent decades (Russia, Poland) and also break-ups of currency unions (Czechoslovakia, Yugoslavia) — and that none of these events caused a lot of lasting damage.
I’m not convinced, if only because the Russia default caused the collapse of LTCM and a serious crisis; if it weren’t for tough arm-twisting by the Fed and billions of private-sector dollars from America’s biggest banks, it could have been much worse. And the end of the koruna and the dinar also meant the end of the Czechoslovakia and Yugoslavia, and the worry is very much that if Greece or anybody else were to exit the euro, then the whole currency union could fall apart, endangering the EU itself.
More generally, financial markets are good at taking the collapse of risky assets in their stride: what they’re bad at is dealing with the collapse of assets they thought were safe. And until very recently, Greek bonds were considered to be an interest-rate play, not a credit play. As a result, the institutions owning them can ill afford to see big losses on them.
The euro was designed to be a super-safe currency; as such, the repercussions of it falling apart would surely be many orders of magnitude greater than anything we saw in the wake of the collapse of the unlamented Yugoslav dinar. Read the rest of this entry »
Europe’s Debt Crisis Is About to End
Posted by Tetyana Matychak in Favourites, Trading Markets on May 6th, 2010
With the likes Nouriel Roubini, Jim Rogers and George Soros predicting a disastrous default by Greece and others in the euro zone, the contrarian in me has to ask if they could be very wrong. Sources from the City of London who would not go on the record have told me this week that Greek debt is currently a screaming buy.
They believe huge profits will be made for those holding Greek paper when Germany, the IMF and ECB outline a new rescue package that will convince investors they are serious about drawing a line in the sand on the sovereign debt crisis.
Rumors of a European TARP moment could yet be unfounded but with Merkel now serious about getting to grips with the crisis, investors who stay short Greek debt over the weekend could be scrambling to reverse their positions on Monday morning.
Officials at Greece’s debt agency did not respond to CNBC requests for comments. Fears over the long-term health of the euro zone remain high and it is difficult to argue with those who see the possibility of some members exiting the euro on a long term view.
Adam Cole, the Global Head of FX Strategy at RBC Capital Markets, is a euro bear and thinks we could hit $1.10 or $1.15 versus the dollar over the medium term but suggests an announcement on Greece this weekend could offer temporary respite for the market. Read the rest of this entry »
The Betrayal of Greece
Posted by Tetyana Matychak in Trading Markets on May 5th, 2010
I gave a speech at an authentic Greek restaurant last night on the state of the world economy. It seemed only fitting that the topic drifted towards Europe and fears that the Greek debt crisis will spread to other euro zone nations. With dramatic headlines of Greek troubles spreading and the euro hitting fresh lows against the dollar, the situation grows more critical each day. But today’s news only highlights a part of the problem.
The real issue is one of denial and lack of resolve. When the European Union was formed more than 50 years ago, there was much hope and optimism that this trading bloc would become a dominant global force.
The euro marched forward as an alternative currency for trade challenging the US dollar as the global trading standard. Everything seemed to be progressing as planned until a bit of bad news spoiled the party. Turns out that some member countries are having second thoughts about honoring their responsibilities to each other and are now putting their own country’s agenda first. Meanwhile, as the debate continues on how to resolve the Greek debt problem, credibility is crumbling.
Measured self-interest is not a bad thing as every country has a right to make fiscal judgments that it believes are in the best interests of its citizens. But it’s also important for member nations to remember the pledge they made when they decided to become part of the European Community. The chant then was “all for one and one for all”. But it looks like that pledge only applies in good times and is instead subject to debate when tough times roll in. A union should be just that; a union. And the self-interest that is percolating throughout Europe is a grave threat to the solidarity of the euro zone. Read the rest of this entry »
S&P Downgrades Spain
Posted by Tetyana Matychak in Favourites, Trading Markets on April 30th, 2010
Standard & Poor’s Corp. on Wednesday downgraded Spain’s long-term credit-rating by one notch, in a new sign of a deepening euro-zone sovereign debt crisis.
Spain become the third euro-zone nation to be hit with a S&P downgrade in just two days, following steeper cuts on Portugal and Greece. On Tuesday, S&P slashed its ratings on those nations, even junking Greece, amid concerns that nation’s policy options are narrowing because of weak economic growth prospects.
The ratings actions underscore mounting concerns that Greece could default on its debt and that European Union authorities are failing to halt contagion of its financial problems to other highly indebted euro-zone sovereigns. Spain, the euro zone’s fourth largest economy, is grappling with a double-digit budget deficit and faces years of weak growth following the collapse of a decade-long construction boom.
“Spain is the 800 pound gorilla in the room. Greece and Portugal are small countries, but Spain is about five times their size with regards gross domestic product,” Win Thin, senior currency strategist at Brown Brothers Harriman & Co, said in a note to investors.
The news of the Spanish downgrade sent equities in Spain broadly lower. S&P said it reflects a downward revision of its medium-term macroeconomic projections. Read the rest of this entry »
Canada’s recession less severe than other G7 countries
Posted by Tetyana Matychak in Trading Markets on April 16th, 2010
Canada experienced a recession that was less severe and shorter than in the other Group of Seven nations, Statistics Canada said Thursday in a special report. Furthermore, it was nowhere near as “severe” or nearly as long as the downturns the country faced in the early 1980s and 1990s.
The key reason, the agency said, was that Canadian companies and governments had better balance sheets compared to their industrialized peers going into the start of the recession — the result of advantageous terms of trade from the commodity bull run.
Between the third quarter of 2008 and the third quarter of 2009, real GDP in Canada fell by 3.3%, compared to a total decline of 3.7% in the United States and even larger declines in Europe and Japan.
“To the degree that the 2008-2009 global recession originated in balance sheets, strong balance sheets in Canada stood it in good stead to endure the recession and emerge into recovery,” said Philip Cross, the agency’s chief economic analyst, in the report. “The recession was shorter and milder in Canada than in other G7 nations, partly because the flow of credit was not disrupted as it was in other nations and a large pool of savings was available to finance spending when income fell temporarily.” Read the rest of this entry »
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Consumer Spending in U.S. Rises More Than Forecast
30 August 2010
Monetary Policy Gets No Respect
19 July 2010
Stocks May Surprise By Year-End
5 July 2010
Is A Global Reserve Currency A Necessity?
28 June 2010
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