Signs of economic slowdown has percolated to the US, but global stock markets remain buoyant.
From Bloomberg,
Manufacturing in the U.S. unexpectedly shrank in June for the first time since the economy emerged from the recession three years ago, indicating a mainstay of the expansion may be faltering.
The Institute for Supply Management’s index fell to 49.7, worse than the most-pessimistic forecast in a Bloomberg News survey, from 53.5 in May, the Tempe, Arizona-based group’s report showed today. Figures less than 50 signal contraction. Measures of orders, production and export demand dropped to three-year lows.
Treasury yields fell on concern Europe’s debt crisis and a slowdown in Asia are taking a bigger toll on the world’s largest economy and hurting manufacturers like DuPont Co. (DD) and Steelcase Inc. (SCS) Assembly lines are at risk of slowing further as consumers temper purchases and companies cut back on investment…
The ISM index, which dropped to its lowest level since July 2009, was less than the median forecast of 52 in the Bloomberg survey. Estimates of 70 economists ranged from 50.5 to 53.5. The gauge averaged 55.2 in 2011 and 57.3 the prior year.
No Recession
Today’s reading is well above the 42.6 level that generally indicates the economy as a whole is expanding, according to ISM…
Manufacturing is also weaker in the rest of the world. The industry in the euro-area contracted for an 11th straight month in June as Europe’s debt crisis sapped demand. A measure of the region’s factories held at 45.1, London-based Markit Economics said.
No worry, bad news has never been a problem as central banks are expected to ride like the fabled knights to save the damsel in distress.
From another Bloomberg article,
Japanese and Australian stock futures rose on expectations that a contraction in U.S. manufacturing may encourage the Federal Reserve to ease monetary policy as the European Central Bank cuts interest rates to help contain the region’s sovereign-debt crisis.
Yet another article from Bloomberg,
Asian stocks climbed for a fifth day, the longest rising streak on the regional benchmark index since March, on expectations that central banks from Washington to Frankfurt may ease monetary policy to spur economic growth…
“The prospect for central banks easing policy gives us a good setup for equity markets globally,” said Mikio Kumada, a global strategist in Singapore at LGT Capital Management, which manages more than $20 billion globally…
The weakness in manufacturing may encourage more accommodative policies from the Federal Reserve, Princeton University economist Alan Blinder said in an interview on Bloomberg Television’s “Market Makers” with Erik Schatzker and Scarlet Fu.
The mantra of money printing as the Holy Grail have always been popular. As the great Professor Ludwig von Mises observed
The popularity of inflation and credit expansion, the ultimate source of the repeated attempts to render people prosperous by credit expansion, and thus the cause of the cyclical fluctuations of business, manifests itself clearly in the customary terminology. The boom is called good business, prosperity, and upswing. Its unavoidable aftermath, the readjustment of conditions to the real data of the market, is called crisis, slump, bad business, depression. People rebel against the insight that the disturbing element is to be seen in the malinvestment and the overconsumption of the boom period and that such an artificially induced boom is doomed. They are looking for the philosophers' stone to make it last
Yet 5 years of sustained inflationism have only worsened the crisis.
Inflationism is like religion, it is based on faith.
Absent real actions, until when can stock markets rise on mere ‘talk therapy’ or on expectations that central banks will deliver the ‘Bernanke PUT’? When will reality collide with hope?
Be careful out there.
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