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Mon, 20th February 2017

Anirudh Sethi Report

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Archives of “Late-2000s recession” Tag

Overnight US Market :Dow closed up 107 points.Crosses 20600.S&P 500 -Nasdaq Hitting New High

Stocks jumped to new record highs and the Dow shot past 20,600 on Wednesday after more reports showed the U.S. economy continues to strengthen.

The Dow Jones industrial average climbed 107 points, up 0.5% to a new closing high of 20,611.86.

Also building upon their record highs set in the previous session were the S&P 500 and Nasdaq composite, up 0.5% to 2349.25 and 0.6% to 5819.44, respectively.

The encouraging data could push the Federal Reserve to raise interest rates more aggressively from the record lows marked during the Great Recession.

Wednesday’s economic reports give the Federal Reserve more encouragement to raise interest rates, and economists said the possibility is increasing that it may happen at the central bank’s next meeting in March. Retailers had stronger sales in January than economists expected, and inflation at the consumer level was the highest in years. Consumer prices rose 2.5% in January from a year earlier, the highest rate since March 2012.

Fed Chair Janet Yellen said in testimony before a Congressional committee that the strengthening job market and a modest move higher in inflation should warrant continued, gradual increases in interest rates, echoing her comments from a day earlier. The central bank raised rates in December for just the second time in a decade, after keeping rates at nearly zero to help lift the economy out of the Great Recession.

Jeff Gundlach’s Forecast For 2017

Investors will confront excessive debt, high P/E levels and political uncertainty as they enter the Trump presidential era. In response, according to Jeffrey Gundlach, U.S.-centric portfolios should diversify globally.

Gundlach is the founder and chief investment officer of Los Angeles-based DoubleLine Capital, a leading provider of fixed-income mutual funds and ETFs. He spoke to investors via a conference call on January 10. Slides from that presentation are available here. This webinar was his annual forecast for the global markets and economies for 2017.

Before we look at his 2017 predictions, let’s review his forecasts from a year ago. His two highest conviction forecasts were that the Fed would not raise rates more than once, despite the Fed’s own predictions, and that Trump would win the presidency. Both predictions were accurate.

But he was also downbeat on emerging markets, and singled out Brazil and Shanghai as likely underperformers. Brazil turned out to be the best-performing emerging market last year, gaining 69.1%, but he was correct about Shanghai, which was the worst performing market, losing 16.5%.

Gundlach said he had a “low conviction” prediction that the yield on the 10-year Treasury would break to the upside. It began 2016 at 2.11% and ended at 2.45%. He said the probability was that U.S. equities would decline in 2016, yet the markets gained approximately 13%. Gold, he said, would hit $1,400 at some point in 2016. It began the year at approximately $1,100, hit a high of $1,365 during the summer and closed at approximately $1,150. 

Overnight US Market :DOW Closed + 114 points.S&P 500 Up 15 points

The trek to Dow 20,000 continues.

It’s taken nearly 120 years to get close to this point as the Dow Jones industrial average came within 47 points Tuesday of its biggest milestone yet.

The race to 20,000 for the blue chip stock index, which began way back in 1896, picked up speed after Election Day on hopes that president-elect Donald Trump’s policies will stoke growth.

At its afternoon intraday record peak, the Dow was up more than 155 points, or 0.8%, to a high of 19,953.75, before pulling back slightly to close up 114.78 points, or 0.6%, to close at 19,911.21.

Since Election Day the Dow has surged about 9%, from around 18,300 . The Dow made history back during the Internet stock boom in 1999 when it first crossed the 10,000 mark.

Since then, the Dow has suffered through two brutal bear markets, the first in 2000-2002 following the dot-com stock crash and then 2007-2009 during the Great Recession.

Overnight US Market :Dow closed above 19000 + 67 points

Get out the Dow 19,000 rally caps. The Dow Jones industrial average, arguably the world’s best-known stock market gauge, closed above the 19,000 barrier Tuesday for the first time in its 120-year history.

For the second straight day, all four major U.S. stock indexes touched new record-high territory. The Dow jumped 67.18 points, or 0.4%, to close at a record high of 19,023.87.

In a day of milestones, the benchmark Standard & Poor’s 500 stock index closed above 2200 for the first time ever as it rose 4.76 points, or 0.2%, to 2202.94. The Nasdaq composite rose 0.3%, to an all-time closing high of 5386.35 and the Russell 2000 gained 0.9% to 1334.34, its thirteenth straight session of gains — its longest winning streak in 20 years.

The assault on Dow 19,000 has taken nearly two years, or 700 calendar days, since it took out the 18,000 barrier back on Dec. 23, 2014. It was the slowest climb from one 1,000-point milestone to the next since taking nearly six years to climb from 14,000 in July 2007 to 15,000 in May 2013. (That long drought, of course, coincided with the Great Recession and the worst stock market decline since the Great Depression.)

Dow 19,000 is the latest signal that the rally sparked by Donald Trump’s surprise presidential election win is broadening as investors continue to bet on the prospects for a more investor- and business-friendly White House and Congress.

Whether the bullish hype turns out to be the right trade remains to be seen, as Trump has yet to get the keys to the White House or make one of his campaign promises come true.

Eurozone retail PMI’s fall in October but what happened in Sep?

A poor showing from retail PMI’s in October

The latest retail PMI’s from the Eurozone fell in October.

  • Eurozone 48.6 v s49.6 prior
  • Germany 51.0 vs 53.0
  • France 47.5 vs 49.1 prior
  • Italy 46.5 vs 45.0 prior

Italy was the only one that gained but is still in contraction.

Perhaps more importantly we need to look at the Sep numbers ahead of the main Eurozone retail sales report at the top of the hour.

They we’re much better either.

  • EZ 49.6 vs 51.0
  • Germany 53.0 vs 54.1
  • France 49.1 vs 53.0
  • Italy 45.0 vs 43.2 prior

As US Corporate Debt Soars, Earnings Suggest Dim Outlook on Growth

$10 and the US TreasuryKristian Rouz – Capital expenditures on investment and dividend payments in the US corporate sector have been outpacing the total cash flow, or earnings, since mid-2015, stirring worry regarding the sector’s lack of profitability. Meanwhile, the total volume of expenses has been above cash flow since mid-2011, resulting in the currently mounting concern that this will result in underinvestment, an accelerated slowdown or a recession. The rising amount of corporate debt in one of the main concerns, and the broader demand-side policies’ failure to revive private sector growth has only added to the economic dismay.

The year-on-year pace of economic expansion has slowed to roughly 1pc in the past quarter, and while the figures for 3Q16 are being prepared for release later this month, the New York Fed has lowered its projections for the quarter. Having previously expected an acceleration in growth to above 3pc annualized, the New York Fed is currently expecting growth of 2.22pc year-on-year, with the growth projection for the year of 2016 lowered to just 1.40pc at best. The “Nowcast” model, used by the regional regulator, takes multiple broader economic parameters into account, including business sentiment, manufacturing activity, and consumption, among others. The slowdown in economic activity in October and September’s slump in housing starts have resulted in the lowered forecast.

The deceleration in the economy is mainly attributed to mounting disinvestment pressures, even though base interest rates are ultra-accommodative. The overregulated economy is losing momentum, and the lack of funds readily available for investment and reinvestment in the corporate sector is another concern.

Overnight US Market :Dow closed +39 points

Stocks closed higher Friday but pulled back from earlier highs after three big U.S. banks reported quarterly profits that topped forecasts, boosting hopes on Wall Street that third-quarter earnings will be better than feared and mark the end of the so-called earnings recession.

Powered by upbeat bank earnings, the Dow Jones industrial average rose 39 points, or 0.4%, to 18,138 after being up as much as 160 points earlier. The broad Standard & Poor’s 500 stock index was up less than 0.1% to 2133 and the Nasdaq composite added less than 0.1% to 5214.

Before the opening bell, JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo(WFC), which is embroiled in a crisis over fraudulently opening customer accounts, all posted profit and sales numbers that exceeded analyst expectations. Bank shares were mixed after sharp early gains. Shares of JPMorgan were down 0.3% and Citigroup stock was 0.3% higher. Wells Fargo was flat.

Wall Street is hoping the S&P 500 will break a string of four straight quarters of contracting profit growth when the third-quarter earnings season is complete.

Clueless: IMF Wonders Why the World Is Resisting Globalization

IMF Managing Director Christine Lagarde arrives for the IMFC Plenary Session during the IMF and World Bank Group 2016 Spring Meetings on April 16, 2016 in Washington, DCSpeaking during the October 6 opening ceremony, IMF Managing Director Christine Lagarde referred to the global economy as “weak and fragile.”

Radio Sputnik’s Loud & Clear producer Walter Smolarek noted that, on one hand, the economy of the West has not completely recovered from the recession of 2008-2009, despite significant measures taken by financial regulators. These measures have resulted in only temporary fixes that have failed to return the global economy to where it was prior to the recession.

Those countries, such as BRICS members, that could count as real engines of post-crisis world economic growth have had a “very rough few years,” Smolarek says, due, in part, to low commodity prices. A dramatic oil-price drop caused a cascade of other negative economic effects in those countries.

Smolarek notes, however, that when Lagarde speaks about a “weak and fragile” economy, she is speaking about the top of the economic food chain, primarily the largest financial institutions and multinational corporations. But these entities, when faced with challenges, simply divert the negative economic impact down the chain, where the working class suffers the effects. For the working class, however, the IMF offers no solutions and, indeed, hardly addresses the issue as relevant to their message.

India’s salary growth at 0.2 per cent, GDP gain of 63.8 per cent since 2008

India has seen a salary growth of just 0.2 per cent since the great recession eight years back, while China recorded the largest real salary growth of 10.6 per cent during the period under review, says a report.

According to a new analysis by the Hay Group division of Korn Ferry, India’s salary growth stood at 0.2 per cent in real terms, with a GDP gain of 63.8 per cent over the same period.

During the period under review, China, Indonesia and Mexico had the largest real salary growth at 10.6 per cent, 9.3 per cent and 8.9 per cent, respectively.

Meanwhile, some other emerging markets including Turkey, Argentina, Russia and Brazil had the worst real salary growth at (-) 34.4 per cent, (-) 18.6 per cent, (-) 17.1 per cent and (-) 15.3 per cent, respectively.

“Most emerging G20 markets stood at either one end of the scale or the other either amongst the highest for wage growth, or amongst the lowest. However, India stood right in the middle, with all the mature markets,” the report said.

Russia’s Recession Continues, GDP to Shrink 1.5% in 2016 – ACRA Forecast

Russia’s recession has not yet ended and activity in a number of key sectors has declined over the past five months, the country’s Analytical Credit Rating Agency (ACRA) said Monday.

“Economic statistics for January-July 2016 show that the recession de-facto has not ended. Current seasonally adjusted growth rates of the major sectors remain negative. The mining sector, retail, construction and other basic activities have been declining over the last five months,” ACRA said in its latest forecast. Russia’s recession could last until early 2017, with growth rates likely to be restricted to less than 1.5 percent after that even in case oil prices rise, according to the forecast. Russia’s GDP is expected to fall 1.5 percent in 2016 and 0.1 percent next year before returning to growth and expanding 0.5 percent in 2018 and 0.7 percent in 2019.

The continued under-performance is caused mainly by the 2014-2015 commodity price slump, which continue to depress GDP growth rates despite Russia’s economy having mainly adjusted to new conditions, the forecast said, noting that consumer spending, fiscal policies and employment have yet to complete the adjustment process.

In its oil price forecast, the agency said that Russia’s Urals crude benchmark is expected to average at $41 per barrel in 2016 before appreciating to $43 and $44 per barrel in the two subsequent years. Russia has been hit by a downturn that began in early 2015 after falling oil prices and Western anti-Russia sanctions took bite. The country’s GDP fell 3.7 percent in 2015, according to the Russian Federal Statistics Service Rosstat. In September, Russian Economic Development Minister Alexei Ulyukayev said that the ministry has revised its 2016 growth forecast downward from —0.2 percent to —0.6 percent. The ministry expects growth in the third and fourth quarters.