The rally in global equity markets isn’t reflecting risks to economic growth from the
European debt crisis and U.S. spending cuts, said Nouriel Roubini, the
New York University professor famous for predicting the 2008 crisis.
Global stocks have gained more than $2 trillion since the start of
2013 as central banks move to stimulate economic growth. Risks including
a deeper recession in Europe triggered by austerity measures and
political turmoil as well as slower U.S. economic growth may return in
the second half of the year, said Roubini, chairman of Roubini Global
Economics LLC.
“Those risks are currently somehow under-priced by the
market,” he said today in an interview. “They may be contained in the
first half of the year, but they may re-emerge.”
…
BofA
Merrill Lynch technical strategist MacNeil Curry is out with a pretty pessimistic note to begin the week.
Curry’s message to the bank’s clients is that a coming bounce in the
stock market following the first real sell-off of the year will probably
prove to be only temporary. He notes that other risky assets, like
European stocks and peripheral government debt, have already taken a
turn down.
Below are the key paragraphs from Curry’s note:
While the evidence warns of the potential for new cycle highs in US risk, don’t lose sight of the bigger picture.
While US equities could see a push to new cycle
highs on the back a renewed resurgence in risk, the larger body of
evidence says that this is a VERY late stage advance for
ESH3/S&P500. Gasoline prices and sentiment are particularly worthy
of note as both are at levels that have repeatedly coincided with medium
term highs. Historically, RBOB moves above $3.50 have resulted in
S&P500 tops, while sentiment (using DSI as a proxy) has reached
relative extremes from which the market has often turned lower.
Commodities & European risk markets have already turned trend. Stay bearish. Bunds to benefit. Waiting for USDSEK
While US equities could see new highs, they are the
exception, not the rule in the risk world. Indeed, both commodity
markets (specifically Oil and Copper) and European risk markets
(peripheral debt and Euro Stoxx) have already turned medium term
bearish. Going forward, bounces in these assets should be seen as
selling opportunities. Meanwhile Bunds will continue to outperform as
yields remain on track to test and likely break their 2012 lows of
1.256%/1.123%. Finally, we continue to watch $/SEK as a rebound in risk
sentiment should take the pair down into the 6.4086/6.3558 support zone.
This would be our opportunity to go long for 6.8156 and potentially
beyond.
…
‘Dilbert’ Creator Alleges Vast Conspiracy — Predicts 20% Market Collapse
Nearly half of Italy may already be on board.
Beppe Grillo, the leader of Italy’s nascent Five-Star Movement
catapulted into power by last week’s Italian elections, is causing a bit
of a stir this weekend.
Saturday,
Grillo told German weekly news magazine Focus that given the dire straits Italy’s economy is in, if things didn’t change, Italians would want to leave the euro.
Then, in an interview Sunday with Bild — Germany’s biggest newspaper — Grillo said he supports a referendum on euro membership.
Referenda on euro membership in the euro area periphery, which is
suffering the pain of record levels of youth unemployment and, in
Italy’s case, a deepening recession, tend to spook investors.
…
Former high-level Greek diplomat Leonidas Chrysanthopoulos told the UK’s
New Statesman last
week that discussions had taken place between senior Greek politicians
and the armed forces on the military’s response to what Chrysanthopoulos
described as an “explosion of social unrest” expected to occur “quite
soon.”
Chrysanthopoulos said that in the coming months, “There will be
further increases in armed actions. There will be bloody
demonstrations.”
Without giving details, he said, “There are contacts by certain
politicians with elements in the armed forces to guarantee that in the
event of major social unrest, the army will not intervene.”
….
Why Europe just got its first ‘rebellion’ of the crisis era
Krugman: This is how the euro ends…
The awesome chart below was created by Doug Short, reflecting that a “ton of cash has disappeared in investors pockets this past month!”
CLICK ON CHART TO ENLARGE
…
As we have been warning for nearly a year, the biggest threat facing
China has been the fact that contrary to solemn promises, the problem of
persistent, strong and very much relentless real-estate inflation has
not only not been tamed but has been first and foremost on the minds of
both the PBOC and the local government. After all with the entire
“developed” world flooding the market every single day with countless
billions in new cheap, hot money, it was inevitable that much of it
would end up in the mainland Chinese real estate market. And since both
the central bank and the politburo are well aware that the path from
property inflation to broad price hikes, including the all critical to
social stability pork and other food, is very short, it was inevitable
that the issue of inflation would have to be dealt with eventually.
Tonight is that “eventually”, when following news from two days ago that
yet another Chinese PMI indicator missed, this time the Services data
which slid from 56.2 to 54.5, the government announced its most
aggressive round of property curbs yet. The immediate result was that
the Shanghai Stock Exchange Property Index slumped by a whopping 9.3%,
the steepest drop since June 2008, and pushing it down to -11% for the
year. The weakness also spread to the broader market, with the Composite
closing down 3.65% the biggest drop in months, and now just barely
positive, at +0.2%, year to date. We expect all 2013 gains to be
promptly wiped out when tonight’s risk off session resumes in earnest.
Elsewhere overnight, the Bank of Japan’s new head Kuroda did what the
BOJ has been doing best (and only) for the past six months – talk, talk
and talk some more, this time in his parliamentary confirmation
hearing. He repeated the usual tripe that only a central banker can spew
with impunity. Select speech headlines from Bloomberg:
- KURODA: ENDING DEFLATION BIGGEST TASK FOR JAPAN ECONOMY
- KURODA: BOJ’S EFFORTS HAVE FAILED TO BEAT DEFLATION
- KURODA SAYS BOJ HASN’T BOUGHT ENOUGH ASSETS TO END DEFLATION
- KURODA SAYS NOT MUCH ROOM TO CUT INTEREST RATES
- KURODA SAYS BOJ EASING ISN’T AIMED AT WEAKENING THE YEN
- KURODA SAYS CAN’T DENY MONETARY POLICY AFFECTS CURRENCY MARKET
- KURODA SAYS ACHIEVING INFLATION TARGET IS BOJ’S JOB
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