Aug 27, 2010 7:16 PM GMT+0530
Nouriel Roubini, the New York University professor who forecast the U.S. recession more than a year before it began, said he would like to see Federal Reserve Chairman Ben S. Bernanke acknowledge today that the central bank overestimated the economy’s recovery. “He would have to recognize that the economic recovery is faltering and that the Fed was wrong in expecting a stronger recovery this year,” Roubini said an interview on Bloomberg Radio. “He could then start to consider which are the additional policy actions” that are necessary to “try to prevent a double dip recession.”
Bernanke will address central bankers around the world at a symposium today in Jackson Hole. The Fed this month decided to keep its bond holdings at $2.05 trillion by reinvesting proceeds from maturing agency and mortgage-backed securities in Treasuries to support a slowing economic recovery.
In April, the ADB had forecast that China would grow at 9.6 percent and India at 8.2 percent this year, but the figures would be revised in September, he said. Growth in the two economies could decelerate in the second half due to the base effect. He said though downside risks remain in the U.S. economy, it was likely to maintain around 3 percent growth this year. “We do not think there will be double-dip recession in the U.S.,” he said, adding the euro zone was also performing better mainly on account of surge in German exports.
The decision of the central banks in India and other Asian countries to raise interest rates could possibility lead to a surge in capital flows into the region as investors are looking for safer havens as well as higher returns on investment. “Asian countries are now raising Continue reading
U.S. private employers added fewer workers to their payrolls in July than expected and hiring in June was much weaker than had been thought, a big blow to an already feeble economic recovery. The dismal news on jobs poses a challenge to officials at the Federal Reserve who are debating whether more needs to be done to foster growth, as well as to Democrats hoping to retain their congressional majorities in November elections. “The labor market improvement has slowed to a glacial pace, consistent with third-quarter growth even slower than the second,” said Nigel Gault, chief U.S. Economist at IHS Global Insight in Lexington Massachusetts. “It doesn’t look like a double-dip, but it looks like very weak growth.” Overall non-farm payrolls fell 131,000 last month, the Labor Department said on Friday, the second straight monthly decline as temporary government jobs to conduct the decennial census dropped by 143,000.
Private employment, a better gauge of labor market health, rose a modest 71,000 after gaining just 31,000 in June. The government revised payrolls for May and June to show 97,000 fewer jobs than previously reported. Financial markets had expected overall employment to fall 65,000 in July, with private-sector hiring increasing 90,000. Prices for safe-haven U.S. government bonds rallied, driving benchmark 10-year Treasury debt yields to a 15-month low, and the dollar tumbled to near a 15-year low against the yen. Given the poor state of the labor market, discouraged workers gave up the search for jobs in droves last month. That kept the jobless rate steady at 9.5 percent since people not looking for work are not counted as being in the labor force.
POLITICS AND THE FED
Job growth has taken a step back after fairly strong gains between February and April, putting in jeopardy the economy’s recovery from its worst downturn since the 1930s. Still, the pace of layoffs has moderated significantly from the first quarter of last year, when employers were culling an average of 752,000 jobs a month. Growing unease over the health of the economy is Continue reading
Reuters | Fri Jul 2, 2010 | 11:08am EDT
With the global economy slowing, interest rates about as low as they can go, governments getting austere and banks being investigated for stress, it is getting harder for investors to keep putting on their bullish faces. Heading into the first full week of the second half, investors are still committed to riskier assets such as equities and high-yield bonds in their portfolios, but are being battered with questions about whether this is the right stance. Reuters asset allocation polls for June showed investors cutting stocks a bit, but retaining a long-held overweight bias toward them. They also moved into the riskier end of bonds, seeking yield. But markets themselves are telling another story.
After a brief rally early last month, world stocks have fallen almost steadily. What was shaping up to be a gain on Friday was only the second up day in nine sessions that have seen stocks lose around 8 percent. At the same time, bond yields are painting a picture of deep concern about the future. Citi’s composite world bond yield is only 1.8 percent, while short-term U.S. and euro zone yields are only 0.6 percent. "There is growing concern over the possibility of a double-dip recession in developed markets," said Rob Carnell, chief international economist at ING Commercial Banking. "In consequence, people want to keep their money as liquid as possible in case things start to turn down." Just about everything has been turning down from bond yields, to stocks, economic indicators and the Baltic Freight Index, a proxy for world trade. Friday’s U.S. jobs data will have done nothing to ease concerns, given that private employment gains were less than expected and that jobs are a lagging indicator.
Reuters | Sun Jun 27, 2010 | 6:29pm IST
U.S. stocks are struggling to regain momentum in what could be a bearish signal as the market tries to sustain a rally after recent heavy falls. On Tuesday, a sharp drop in the S&P 500 saw the index close below its 200-day moving average for the second time in the last four weeks, a sign that equities could struggle in coming months. "It’s not a good sign," said Bill Strazullo, partner and chief investment strategist at Bell Curve Trading in Boston. "It’s really critical what’s going on here." Buying interest has waned in the wake of more lackluster economic data and bearish commentary from the Federal Reserve. Even brief rallies are being used as opportunities to sell. The 200-day moving average is an indicator used by some investors to gauge momentum. The S&P 500 closed below the level in mid-May – the first time in nearly a year – amid worries about the economic recovery and Europe’s public debt crisis.
The drop in May marked the first time the index closed below its 200-day moving average since June 2009, shortly after equities began a blistering 80 percent move from a 12-year low in March. Strazullo said large institutional investors are revaluating prices after the market hit a 9-month high in April. At that time stocks were priced for everything going right, he said. Now bearish factors abound. Austerity measures and public debt mountains in Europe threaten to slow growth. Weak housing and labor market data in the United States are creating fears of a double dip recession. From a technical standpoint Strazullo sees the 1,050 level on the S&P 500, the closing low for this year, as an area where significant selling could be triggered. "The last line in the sand is 1,050. You break that, it’s done, the March ’09 rally is over," he said.
PULLBACK ON THE HORIZON?
Asbury Research, a Chicago-based research firm, believes there could be a significant pull back in the third quarter. The analysts point to what they call "major bearish trend changes" in France’s leading index, the CAC 40 and Japan’s Nikkei 225, which are positively correlated to U.S. indexes. The CAC 40 led the decline in U.S. indexes
Bloomberg | June 07, 2010 | 9:22 PM EDT
The U.S. has supplanted China and Brazil as the most attractive market for investors as confidence in the global economic recovery wanes in the wake of the Greek debt crisis. Investors are putting their money on President Barack Obama’s stewardship of the U.S. economy even as his job-approval rating has declined, according to a global quarterly poll of investors and analysts who are Bloomberg subscribers. Almost 4 of 10 respondents picked the U.S. as the market presenting the best opportunities in the year ahead. That’s more than double the portion who said so last October, when the U.S. was rated the market posing the greatest downside risk by a plurality of respondents.
Lawrence Summers, director of the White House National Economic Council, said this attests to Obama’s efforts at “restoring the United States to strong economic fundamentals.” He added that “while there remains much to do, the U.S. economy is growing.” “We’ve seen the bottom; we’re firm, and the United States is slowly moving forward,” said Wayne Smith, 51, managing director of fixed-income trading at Uniondale, New York-based Northeast Securities, which manages $3.5 billion. Following the U.S.’s 39 percent rating as the most promising market were Brazil, chosen by 29 percent; China, 28 percent; and India, 27 percent. Those are three of the four so- called BRICs, large emerging markets that also include Russia. Just 6 percent chose Russia. In a poll taken in January, China was the favorite followed by Brazil. Respondents were allowed to pick multiple countries.
‘Least Dirty Shirt’
The U.S. is one of the few relative bright spots in a global market rattled by the Greek debt crisis. Bill Gross, co- chief investment officer of Pacific Investment Management Co. and manager of the world’s largest bond fund, called the U.S. “the least dirty shirt,” in a Bloomberg Radio interview. Forty-two percent of investors now believe the world economy is deteriorating, double the 21 percent who
Reuters | Wed Jun 2, 2010 | 9:27am IST
Radical measures to correct public deficits that are being forced on governments by financial markets risk creating a new recession, the International Labour Organisation (ILO) said on Tuesday. The United Nations agency, which gathers unions, employers and governments to discuss employment issues, said public debt needed to be reduced in an orderly manner. But a report by ILO Director-General Juan Somavia said that pressure from financial markets was pushing countries into stringent fiscal policies that jeopardise recovery, making it less likely that growth, employment and wages — and hence tax revenues — will recover soon. That would make it harder to pay off debts, he said in a report submitted to the ILO’s annual three-week conference starting on Wednesday.
"Why now, at this very uncertain time of weak recovery, should the sovereign debt issue, with such a sense of a gathering storm, become the major, urgent, overriding global policy priority for markets?" Somavia asked. "This may not be in their own interests if it leads to greater economic contraction or even a double-dip recession. It was just such a response that helped to bring about the Great Depression of the 1930s," he said. Somavia said working families were already bearing a large share of the costs of the crisis and that would increase if sovereign debt resolution rather than growth and jobs became the priority. The experience of Latin America in the 1980s and Asia in the 1990s showed this could hurt social stability, he said.