Unequal Recovery
Unequal Recovery
There is a marked contrast in global economic activity which is growing almost daily.
The contrast that is, not the activity!
China, which is obviously now a key driver of global activity, has kept its policy options open while watching western economies struggling to come to unprecedented levels of debt.
The well-worn expression “When America sneezes, the world catches a cold” while probably true about the start the global downturn in 2008 won’t apply in the future. We will have to substitute China for America! Interestingly the expression was originally coined for France! Live and learn!
The fate of the Australian economy now sits firmly in the hands of the Chinese as probably does the rest of the world.
Today’s better than expected PMI Data from China, still below 50 but up to 49.1 from 47.9, together with better than expected domestic, data saw the AUD rally strongly from its lows. Elsewhere in Asia regional currencies are strengthening and a fair proportion of the blame for that (according to the ADB) lies with U.S. policy.
Both Hong Kong and Singapore have seen their currencies surging. The HKMA has been intervening to weaken their currency. Japan which is viewed outside of emerging Asia is gaining some relief as their currency weakens on expectation of further monetary easing.
Zero interest rate policy has been in place in Japan for nearly twenty years so they, like the West, have limited further initiatives to stimulate the economy.
It was always expected that Asia would recover from the global downturn quicker than the West but what is becoming a worrying trend is that there are Western economies that are still in recession and in those that are growing, primarily Germany and America, growth is both weak and fragile.
The austerity policies that have been forced upon a number of economies in Europe together with high levels of unemployment have raised Governments borrowing requirements as tax receipts have fallen and benefit payments risen. It is a vicious circle that will need to be broken is a sustainable recovery is to take hold. In the U.S. growth is patchy and economic data difficult to discern a trend from. With the election now less than two weeks away, irrespective of who is elected, the economy is clearly the no.1 priority for the President
Today’s major risk event is ECB President Draghi’s “testimony” before the Bundestag in Germany. It really shows the power Germany now wields in the Eurozone that an Official from an EU-wide institution feels it necessary to testify to a domestic Parliament.
On the data front, the IFO index of German economic activity is released later. It is expected to show a slight improvement from last month’s figure which was the weakest in more than 30 months. Sentiment indices are generally “bumping along the bottom” in Europe not showing any recovery but not weakening to any degree either.
In the U.K. the BoE Governor said in a speech that the MPC is prepared to stimulate the economy further should be fledgling recovery being seen there start to weaken. Sterling fell to six week lows yesterday but managed to find some support around 1.5900.
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Comment by Alan Hill From Sarrafx Trading on October 24, 2012 at 7:46am -
It will be close.
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Comment by Peter jcp on October 24, 2012 at 10:04am -
I agree - the Presidential result will be close - which in itself is worrying - Just like what happened last time in the UK with the hung parliament.
The fact that it will be close - within a few percent either way -shows really that people are really fed up with who ever is in power - as they have become disillusioned by Politicians and the promises etc etc.
Uncertainty is great for the Markets - its an excuse for the market makers to try and make more money.
Whenever the economies are running smoothly and all is positive more will invest and the market are more liquid - with more to go around and be shared.
When its more uncertainty - volumes are down ( 30-50%) and the market makers need to be greedier to maintain their profits and targets and so the smaller investors and traders will suffer.
With regards to whoever wins and his next President - they will still be in for a tough time as the world is in a mess and the recent figures being churned out by the US - seem highly suspicious to me.
In the UK when the Conservative / Liberal coalition got in after many years of Labour ( democrats) - the new chanceller of the exchequer - ( Ben - equivalent) was left a note in his office by his predecessor - basically saying - "we have run out of money - there's non left" ;-)
Well basically when Obama took over from the Republicans - it was the same - the US was up the creek without a paddle - so even superman would have had a problem ;-)
Any US politician - might now be thinking - do we really want to be in power for the next few yrs while all this is going on - far easier to sit back and just complain about the opposition - lol
Anyway - back to trying to make some more money - so I can keep all these politicians in their jobs - glad I am not in the Eurozone - I would need to work 50 hrs a week - just to pay that lot !!!
Have a great day Alan
Regards
Peter
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Comment by Alan Hill From Sarrafx Trading on October 24, 2012 at 10:41am
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Nice subtle dig at the market makers!
50 hours? I wish! ;)
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Comment by Romano on October 24, 2012 at 4:22pm -
To me, it looks like it doesnt matter which one of those 2 idiots win - they`re both same creeps that will be willing to continue slaughtering civilians and innocent children in the middle east(to preserve petrodollar) while at the same time kicking can down the road at home. Only real visible difference would be Ron Paul but somebody made good job to get rid of him from media and public and hide his progress.
Now as for UK, your best bet IMO should be UKIP Peter...
Regards.
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Comment by Alan Hill From Sarrafx Trading on October 24, 2012 at 6:49pm
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Radical!
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Comment by Romano on October 24, 2012 at 7:36pm
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No Alan, this is radical:
"On December 31, 2011, President Obama signed the National Defense Authorization
Act (NDAA), codifying indefinite military detention without charge or trial into
law for the first time in American history. The NDAA’s dangerous detention
provisions would authorize the president — and all future presidents — to order
the military to pick up and indefinitely imprison people captured anywhere in
the world, far from any battlefield."
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Comment by Alan Hill From Sarrafx Trading on October 25, 2012 at 5:22am
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Ron Paul and UKIP are radical.
NDAA just plain crazy
Comment
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