S&P 500 Hits Four-Year High, Global Stocks Rally on ECB Hopes
Stocks hit a four-year high on Tuesday as equity markets continue to grind steadily higher on hopes that central banks will act in the near future to stimulate their economies.
Markets hopeful the US Fed will launch QE3
LONDON: “We’re saved!” cry Vladimir and Estragon in Samuel Beckett’s allegorical play Waiting for Godot, whenever they think Godot may be approaching.
Sound familiar? For Godot, just substitute the Fed and QE3 and there you have markets’ joyous reaction to the slightest hint the US Federal Reserve may be about to embark on its third money-printing, quantitative easing (QE) round.
But Godot represents not only Fed/QE3 an attempt to stimulate the economy by pumping money into it but also the European Central Bank (ECB) and the People’s Bank of China (PBOC), both of which are expected to act to support growth.
Almost two-thirds of investors believe QE3 is on its way, a Reuters poll finds. Another poll reveals markets are confident the ECB will buy Italian and Spanish bonds from September and will cut interest rates to record lows.
LONDON, Aug 30 (MNI) – Market continues its positive speculation that ECB President Mario Draghi will present a plan at next week’s Sep. 6 policy meeting meeting to support eurozone peripheral debt with euro-dollar trading with a buoyant tone through European morning trade Thursday.
The bid tone was despite suggestions that end-month trade could produce euro supply at the fixes, as well as ideas that Fed’s Bernanke may be poised to disappoint a market looking for hints for a near-term move toward QE3.
ATHENS, Greece — Greece’s prime minister promised his austerity-weary countrymen on Thursday that new spending cuts planned for 2013-14 would be the last major austerity package, but insisted it was vital to remain in the euro.
Antonis Samaras, who is struggling to get his uneasy coalition partners’ full support for the €11.5 billion ($14.4 billion) in cutbacks, argued that economic reforms and privatizations would restore growth after four years of deep recession.
Spain’s recession worsened in the second quarter this year, after austerity measures designed to shore up the country’s crippled economy hampered consumer spending.
The Madrid-based National Statistics Institute revealed that Spain’s GDP fell 0.4 percent from the previous quarter, which is in line with an estimate made on July 30, before the institute revised down data for 2010 and 2011 on 27 August.
Last month, prime minister Mariano Rajoy unveiled budget cuts that will expand austerity measures to a total of 15 percent of annual GDP by 2014, meaning the country would have to abandon previous forecasts of a return to growth in 2013. Consumer spending has since dropped 1 percent in the quarter.
LONDON Two years into an unpopular austerity programme, recession and bleak public borrowing figures have heaped pressure on Britain’s government to change course.
The cuts have been so painful that nearly half of voters believe finance minister George Osborne should be removed from his post. But if he stays and sticks to his plan to eliminate most of the deficit by 2017, much worse is to come.
He has made a less of a dent in the deficit than hoped, and three quarters of the pain still lies ahead with widespread cuts to spending and benefits likely to have a bigger impact on voters’ wallets than the tax rises and reduced investment to date.
A return to strong growth might make cuts easier but economists do not forecast this for at least a couple of years, a problem for the government with an eye on re-election in 2015.
“It is going to be a long, hard slog,” said Simon Hayes, chief UK economist at Barclays. “Reforms of welfare have only just started. It is inevitably the case that the first things you do are the easiest, and things get tougher as you go on.”
JERUSALEM–Israel’s Knesset voted Monday night to approve a package of austerity measures, including tax increases, to stem the growing deficit as the global economic slowdown continues to hamper local growth.
This chart was just tweeted out by the St. Louis Fed.
Federal government expenditures shrunk at an annualized rate of over 7% in Q4!
China’s fears grow over eurozone crisis
China has expressed deep alarm at the escalating crisis in Europe and warned against austerity overkill as Europe’s crumbling demand sends shock waves through Asia.
Premier Wen Jiabao told German Chancellor Angela Merkel that Europe must “strike a balance” between fiscal tightening and measures to promote growth. “Europe’s debt crisis has continued to worsen, giving rise to serious concerns in the international community. Frankly, I am also worried,” he said.
His comments mark a shift in Chinese policy. Beijing has until now backed austerity across Euroland, but the severity of China’s own downturn has begun to rattle policymakers.
Exports of electronic goods to Italy crashed 43pc in July from a year earlier, and sales to Germany fell 11pc. Caixin reported that processing trade to Europe fell 21pc.
The country’s two largest shipping groups COSCO and China Shipping both reported a drastic losses today. The Shanghai composite index of stocks threatened to break below 2000 today, the lowest since the Lehman crisis.
Mr Wen asked for clarification over whether Italy and Spain would adopt “comprehensive rescue measures” needed to unlock the EU bail-out machinery – and open the door to bond purchases by the European Central Bank.
DUBAI—Dubai-based DP World, the world’s third biggest ports operator, Wednesday warned over the slowdown in the global economy, even as it said its earnings were shielded by a focus on trade with the emerging economies of Africa and India.
DP World Chief Executive Mohammed Sharaf said that after stronger-than-expected economic growth in the first three months, the global economy slowed in the second quarter due to the stalled recovery in the U.S., the continuing euro zone crisis and softening growth in China.
“The global economic uncertainty seen in the first half of the year has continued into the second half,” Mr. Sharaf said.
“We now expect relatively low global growth in the second half of 2012, and for this we are prepared,” Maersk Chief Executive Nils Smedegaard Andersen said. “But it could also turn really bad.”
The CBO has updated its figures for 2013, showing that if we don’t engage in reckless austerity, the economy will continue to recover next year. But if not, well, we would enter a deep, double-dip recession.
The report compares the baseline scenario, in which the Bush tax cuts expire and sequestration spending cuts take effect, with an alternative scenario, in which the tax cuts are extended and the spending cuts deferred. Keeping the Bush tax cuts, deferring the cuts, and maintaining unemployment insurance and current Medicare reimbursement rates would cause the economy to grow at 1.7% but add $400 billion dollars more to the deficit.
Should we remain on the current course, they estimate that the economy will contract by half a percentage point in 2013 due to diminished government spending. If policymakers cut programs aimed at low and moderate income Americans, it would move our recovery to a recession.
There’s still a 100 percent chance the world heads into recession, Marc Faber, publisher of “The Gloom, Boom & Doom Report,” told CNBC’s “Closing Bell” on Thursday, echoing a call he made in May. When you look at the major economies, Europe, the U.S., China and the emerging markets that are dependent on China for growth, Faber, aka Dr. Doom, only sees weakness. “Europe is already in recession,” he said. “Germany is still growing very, very slightly, but is likely to go into recession soon.” Growth in the U.S. is also falling off. “The U.S. economy has decelerated and I don’t see much growth in the next six to 12 months,” Faber said. There’s also little the Federal Reserve and other policy makers can do to turn the U.S. economy around. “I think that if you look at the injection of liquidity and the intervention by the Federal Reserve and the Treasury with fiscal measures, it has already impoverished the U.S. economy,” he said. It would take “massive easing, a huge balance sheet expansion,” to boost economic activity in the U.S., according to Faber. Faber also doesn’t expect much change in the U.S.’s finances regardless of who wins the election in November. “The deficit is $1.3 trillion and, in my view, will go up,” he cautioned.
- Europe’s Scariest Chart… Got Scarier (August 31th, 2012)
-Rosenberg And McCulley: This Indicator Could Be Pointing To Recession (August 28th, 2012)
-CITI: America’s Truckers Have Some Bad News About The US Economy (August 28th, 2012)
-WARNING: We Are Heading For A Market Shock In September or October (August 27th, 2012)
-REPORT: ITALIAN BANK DECLARES ‘HOLIDAY’ (June 10th, 2012)