1--The bears are in the driving seat, but the route has yet to be set, IFR
Excerpt: Weak employment numbers should have equity geeks chomping at the bit as they hope for a continuation of the cheap money injections as the Fed will do all it can to prevent a reversal in fortunes for the resurgent economy. If you can’t quite follow the logic of that, welcome to the distillation of more than 30 years of market experience – nor can I.
However, there are far more worrying developments for the West taking place in the global economic interplay, not least of all to be found in China’s trade figures which were released this morning. Both exports and imports for March were down sharply but these followed something of a statistical aberration in both the January and February figures – the former dropping sharply and the latter equally spiking up but overall trade in both directions is trending lower.
These are not exactly happy times for either the Chinese or for the West which is still sort of hoping that BRIC demand will help to lift it out of the economic waste land which it has been erring around in for nearly half a decade. The rise in Chinese March CPI which was reported on Thursday at 3.6% is also not compelling – slowing growth and rising inflation are about as toxic a mix as one can find and one which always gives all central bankers the heebie-jeebies....
(Spain) However, the cause for concern is in the huge build-up of private debt which has generated a shortfall in domestic savings which in turn has left the government unusually dependent on external funding. Although the banking crisis is not as “in-yer-face” as it was in Ireland, it is in the banks’ balance sheets that the Spanish debt crisis is lodged.
According to the Fotocasa index, residential real estate prices are now 30% below their 2007 peak and, quite evidently, still showing no sign of stabilising. Government pressure on the banks in question remains high to cut the positions and to clean up the asset books but it is hard to find buyers for assets which are still falling in value and where the discounts required to attract investors into buying the gato in the bolsa would need to be substantial.
2--European, Asian Stocks Drop; Japan Keeps Interest Rate, Bloomberg
Excerpt: European stocks fell to a two-month low and Asian equities retreated on concern growth is slowing after China’s imports missed economists’ forecasts and Federal Reserve Chairman Ben S. Bernanke said the U.S. economy hasn’t fully recovered. The yen strengthened....
“Last week’s poor jobs report raises doubts about the strength of the U.S. expansion,” Dan Morris, a global strategist at JPMorgan Asset Management in London, wrote in a report to clients. “There are some uncomfortable parallels between the current macroeconomic environment and that of July last year when equity markets began their precipitous fall. Investors are worried again about the euro-zone crisis.”
European Stocks Fall
The Stoxx 600 dropped to the lowest level since Feb. 1 as all 19 industry groups retreated...
3--Profit Growth Stalls as European Slump Hampers Recovery, Bloomberg
Excerpt: The European debt crisis and a slowdown in China are hurting S&P 500 companies, which derive about 40 percent of profits from abroad. At home, where the S&P 500 Index had its biggest first-quarter rally since 1998, consumer confidence is improving along with the job market -- boosting demand for construction companies and retailers.
“While the U.S. economy is the cleanest shirt in the hamper at the moment, we’re only talking about an economy that’s motoring along at a subpar pace,” said Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion. “The only way you’re going to see higher profitability is through faster growth.”
The U.S. economy will accelerate 2.2 percent this year, up from 1.7 percent in 2011, according to the average of 72 estimates compiled by Bloomberg.
Full Recovery ‘Far’
Federal Reserve Chairman Ben S. Bernanke said yesterday the economy hasn’t fully recovered.
“About three and a half years have passed since the darkest days of the financial crisis, but our economy is still far from having fully recovered from its effects,” Bernanke said in a speech in Stone Mountain, Georgia.
Last month, China pared its growth target to 7.5 percent from an 8 percent set in 2005. The 17-nation euro economy is projected to contract 0.4 percent in 2012, with recessions in countries including Greece and Spain.
4--Wake-Up Call for U.S. Stocks , Lackluster Profits For First Quarter May Rattle Shares, WSJ
Excerpt: Analysts have been lowering expectations for both first-quarter and full-year earnings. They now expect earnings to show average growth of 0.95% over a year earlier in the first quarter.
That would be the lowest rate of year-to-year growth since the end of the financial crisis, and down from expectations of 4.5% in early January, according to S&P Capital IQ. As recently as late September, analysts were looking for 10% growth....
In the run-up to the first-quarter earnings season, the number of companies issuing negative earnings guidance has outpaced those with positive forecasts by the largest margin in two years, according to Morgan Stanley....
That is probably too rosy, says Mr. Trennert of Strategas Research. Profit margins, he says, are at extreme levels—over the past three years, earnings grew 95% while sales rose just 1%—and will likely remain under pressure for some time.
5--China’s Economy--The Frog and the Scorpion, Conn Hallinan, counterpunch
Excerpt: What worries China’s leaders is that one of capitalism’s engines of self-destruction—economic injustice and inequality—is increasing. According to Li Shu, an economist at Beijing Normal University, from 1988 to 2007, the average income of the top 12 percent went from 10 times the bottom 10 percent, to 23 times the bottom 10 percent. According to the Financial Times, it is estimated that China’s richest 1 percent control 40 to 60 percent of total household wealth.
Wealth disparity and economic injustice have fueled “incidents,” ranging from industrial strikes to riots by farmers over inadequate compensation for confiscated land. Endemic local corruption feeds much of the anger....
If China is to shift its economy in the direction of its potentially huge home market, it will have to improve the lives of its citizens. Wages have gone up between 15 and 20 percent over the past two years and are scheduled to rise another 15 percent.
But social services will also have to be improved. Health care, once free, has become a major burden for many Chinese, a problem the government will have to address.
6--Iran Escalates Again, Cuts Off Oil Shipments To Spain, zero hedge
Excerpt: From Press TV: "Tehran has cut oil supply to Spain after stopping crude export to Greece as part of its countersanctions, unnamed sources confirmed on Tuesday. Tehran also mulls cutting oil supply to Germany and Italy."
7-- Prices Should Fall This Tax Season, TrimTabs
Excerpt: ... the initial BLS employment is a preliminary guess. Last year we were reporting that more jobs were being created than what the BLS was saying. It wasn’t until a month ago that the BLS revised last year’s first quarter jobs to roughly what we had reported. This year, we are saying that about 140,000 jobs were created on average each of the past four months. The BLS is saying about 250,000 jobs were created monthly between December and February.
To repeat for the umpteenth time the BLS ignores the real time data embedded in the daily withheld income and employment tax payments as to how many people are working, what industries and where and how much they make before and after tax. Wouldn’t that be useful real time information for a real time financial market to know? But no, the BLS uses survey methodology initially developed in the 1950’s and 60’s.
I keep asking why does it seem as if I am all alone in asking that the US government use real time data for jobs and incomes instead of snail mail technology? Does no one else care? If you do care and want to help, please ask the other bloggers you visit to pick up the baton and also ask why does the US government ignore real time data on jobs and incomes?
8--Japan is Burning Highly-Radioactive Debris, Washington's blog via The Big Picture
Excerpt: Japan is Poisoning Other Countries By Burning Highly-Radioactive Debris
Fukushima will start burning radioactive debris containing up to 100,000 becquerels of radioactive cesium per kilogram. As Mainchi notes:
The state will start building storage facilities for debris generated by the March 2011 tsunami as early as May at two locations in a coastal area of Naraha town, Fukushima Prefecture, Environment Ministry and town officials said Saturday.
About 25,000 tons of debris are expected to be brought into the facilities beginning in the summer, according to the officials.
If more than 100,000 becquerels of radioactive cesium are found per kilogram of debris, the debris will be transferred to a medium-term storage facility to be built by the state. But if burnable debris contains 100,000 becquerels of radioactive cesium or less, it may be disposed of at a temporary incinerator to be built within the prefecture, according to the officials.
Within the 20-km-radius no-go zone spanning across Naraha and five other municipalities along the coast, debris caused by the magnitude 9.0 quake and the subsequent tsunami has amounted to an estimated 474,000 tons, much of remaining where it is.
9--Rousseff Tells Obama Rich Nations’ easy money Policies Harm Growth, Bloomberg
Excerpt: Rousseff, speaking yesterday alongside Obama at the White House, said she is concerned about “expansionist” monetary policies that “lead to a depreciation in the value of the currencies of developed countries, thus impairing growth” in faster-growing emerging markets.
Later, in comments to Brazilian reporters, Rousseff said that as policy makers in developed nations try to cut spending and budget deficits they’ve become too reliant on near-zero interest rates to stimulate growth. Such a policy mix is creating a “monetary tsunami” that damages Brazil by driving up the value of its currency and depressing exports, she said in comments echoing those she made last month in a trip to Germany. ...
On foreign policy, Rousseff said she told Obama that this week’s Summit of the Americas must be the last to exclude Cuba. Both leaders will attend the regional gathering, taking place this year in Cartagena, Colombia, along with representatives from every other Western Hemispheric nation except Cuba, the region’s sole dictatorship.
How to deal with Iran’s nuclear program, which Brazil has defended and the U.S. says is aimed at developing a nuclear weapon, was not discussed, Rousseff said.
Quote: "Not only has earnings growth basically evaporated, but the ratio of negative to positive guidance has risen to levels we last saw two years ago, margins are poised to shrink to a two-year low as well, and only three S and P 500 sectors are actually seen raising their earnings from year-ago levels."-- David Rosenberg, zero hedge