Are things economic a bit better than markets now think?
Just as markets fret and worry about the health of the global economy, and especially countries like Greece, Italy, Spain, the UK and Japan, along comes an optimistic report on the state of the world from a premier international talk shop
Friday saw more volatility in markets and although Wall Street ended in the black after a 165 point swing through the day, commodities weakened, leaving us none the wiser about the strength and direction of sentiment.
Despite months of ignoring the negative and believing every little positive, many investors have started jumping at every negative shadow and ignoring reports from groups like the OECD (The Organisation for Economic Co-operation and Development).
It said Friday that there are growing signs of economic recovery in the world’s biggest economies.
The OECD said the Composite Leading Indicators (CLI) for December "provide stronger signals of an expansionary economic outlook than (in November)".
The indicators for the Group of Seven countries plus emerging giants China, India, Russia and Brazil "are now all close to, or above, their long term trends" it said in a statement.
"In all these countries, industrial production – the underlying reference series for the (leading indicators) – has now reached its trough."
The CLI for the OECD’s 30 member states rose 0.9 points in December compared with November and was 10.1 points higher than in December 2008, it said.
For the US, the CLI was up 0.9 points and 9.0 points, respectively, with the euro area gaining 0.9 points and 12.2 points, and Japan 1.2 points and 8.1 points.
For the BRIC states, which do not belong to the OECD, China was down 0.1 point in December but 9.4 points higher than a year earlier, India was unchanged and up 4.9 points, respectively, with Russia gaining 0.3 points and 14.2 points, and Brazil 0.1 and 13.8 points.
This is the strongest these indicators from the OECD have been for some time, and yet the report won’t change the newly-discovered bearishness.
This week we get an update from China on its economic performance last month.
It won’t change the negativity.
Any rise in inflation, growth and bank lending (some of which could happen) will be bad.
Adding to the pressure this week will be more discussion in the US about ending stimulus spending (and taking away the punchbowl from complacent bankers and investors), a move that could see interest rates rise.
But rates, especially in the US, are easing as nervy investors look for a bit of safety (to protect profits).
So markets face the prospect of more turbulence this week.
Europe’s sovereign debt concerns remain the paramount and longer term worry.
The Dow briefly dipped below the 10,000 point mark late last week before closing just above on Friday night after a mixed US jobs report for January.
That saw 20,000 jobs lost in the month, revisions showing hundreds of thousands of jobs lost in 2009 than previously reported, but a fall in the unemployment rate to 9.7%.
The benchmark Standard & Poor’s 500 is down 7.3% from its 15-month closing peak of January 19.
At its lows on Friday trading, the index was off 9.3% from its January 19 high, but rebounded in late trading with the rest of the market.
A chorus of US money managers and analysts are now saying the market’s rally from the lows of March 2009 has all but run its course.
Friday saw the Dow end up 10.05 points, or 0.1%, at 10,012.23, on Friday.
The Standard & Poor’s 500 Index ended up 3.08 points, or 0.29%, at 1,066.19.
The Nasdaq Composite Index gained 15.69 points, or 0.74%, to close at 2,141.12.
All three major indexes had touched three-month lows during the day.
For the week, the Dow fell 0.6%, the S&P 500 0.7% and the Nasdaq lost 0.3%.
It was the fourth consecutive weekly drop.
The weakness in US consumer spending was underlined with another monthly fall in consumer credit declining, according to figures from the US Fed.
It was the 11th straight monthly fall in December, but the rate of the decline eased.
Total consumer borrowing fell a seasonally adjusted $US1.8 billion, an annual rate of 0.8%, to $US2.456 trillion in December, according to the Federal Reserve figures.
For all of 2009, consumer debt dropped by 4% to $2.46 trillion from $2.56 trillion in 2008, the biggest yearly fall for years.
The Australian market will likely open flat to slightly lower today.
The gyrations on Wall Street saw the Australian futures market ending down 11 points early Saturday, indicating a softish start to the week here.
The ASX200 index fell 107.3 points, or 2.3%, Friday to end at 4514.3.
The All Ordinaries index lost 111.4 points, or 2.4%, to close at 4532.7.
Like the US, it was the local market’s fourth weekly fall,
The benchmark index fell for the fourth straight week, down 1.2%.
It is the worst run since mid-2008 and the market is now down 8.9% in the last four weeks, wiping about $110 billion off its value.
The market peaked on January 11 at 4950.7.
The Aussie dollar ended around 86.7 US cents, up on its lows earlier Friday.
European markets closed lower after the worst week in 11 months.
The concerns about Greece, Portugal and Spain reducing deficits and spending without causing social p
