The resumption of the RISK ON environment has been mainly premised on a supposed recovery by the economies of the US, Europe, China and Japan. The belief is that these countries will do the weightlifting for emerging markets-Asia and relieve the latter from the pressures of the Fed’s “tapering”.
Europe has reportedly been lifted out of recession in the 2nd quarter from improved consumption and production.
chart from economic design
European PMI surveys (Purchasing Managers Index—an indicator of the health of the manufacturing sector through 5 variables; specifically new orders, inventory levels, production, supplier deliveries and the employment environment) supposedly posted significant gains in July and in August.
Well it turns out that expectations and actual performance have once again severely diverged as European industrial output miss by an ocean: the parallel universe.
From Bloomberg: (bold mine)
Euro-area industrial output contracted more than economists forecast in July as manufacturers struggled to shake off the legacy of a record-long recession.
Factory production in the 17-nation euro area fell 1.5 percent from June, when it gained 0.6 percent, the European Union’s statistics office in Luxembourg said today. That’s more than the 0.3 percent contraction forecast by economists, according to the median of 33 estimates in a Bloomberg News survey. (EUITEMUM) In the year, output fell 2.1 percent.
The euro-area economy’s return to growth in the second quarter from its longest-ever recession has been restrained by record unemployment and inflation has remained below the European Central Bank’s 2 percent ceiling for seven months. That may help to explain why economists in a Bloomberg News survey see growth slowing to 0.1 percent in the third quarter after a 0.3 percent expansion in the three months through June.
The industrial-output “data call into question the region’s recovery,” said Chris Williamson, chief economist at Markit Economics in London. “There is clearly a risk that GDP could contract again in the third quarter, as some of this second-quarter growth proves to have been only temporary.”…
Production in Germany, Europe’s largest economy, declined 2.3 percent in July after a 2.2 percent gain in June, today’s report showed. Output in France fell 0.6 percent, while Italian industrial production unexpectedly declined 1.1 percent, signaling that the euro area’s third-biggest economy may still be stuck in its longest recession since World War II.
Some recovery.
Not to worry, European stocks represented by the STOX50 have been rising since the last quarter of 2011 and have presently been drifting at 2 year highs…
GDP annualized
GDP by quarter
…even as the Eurozone has been mired by a continuum of negative growths (based on annual and quarter growth) for the entire 2012 until the 1st quarter 2013.
Who says stock markets reflect on the state of the economy?
1 comment:
The parallel universe and the divergence between stock market performance and economic activity such a GDP, began to narrow ever so slightly on Thursday, September 12, 2013.
Volatility, XVZ, and the Market Off ETN, OFF, both traded higher as the Euro Yen currency carry trade, EUR/JPY, traded lower, inducing Gold, GLD, 3.0% lower, and Silver, SLV, 5.5%, lower, taking Gold Miners, GDX, GDXJ, Silver Miners, SSRI, SIL, SILJ, lower. Sectors trading lower included Solar, TAN, Automobiles,CARZ, Small Cap Industrials, PSCI, and Transportation, XTN, as well as Metal Manufacturing, XME, Steel Producers SLX, Coal Miners, KOL, Industrial Miners, PICK, and Copper Miners, COPX. World Stocks, VT, Nation Investment, EFA, and Global Industrial Producers, FXR, traded lower. European Financials, EUFN, and the Eurozone Stocks, EZU, traded lower. China Financials, CHIX, traded lower, inducing China, YAO, lower. Mexico, EWW, Indonesia, IDX, Philippines, EPHE, Thailand, THD, Peru, EPU, Chile, ECH, Argentina, ARGT, and India, INP, traded lower.
Jesus Christ acting in dispensation, Ephesians 1:10, that is working to fulfill and complete every age and era, brought liberalism’s moral hazard based investment prosperity to its zenith on September 11, 2013, on a Euro Yen currency carry trade, and on a Renminbi/Yuan currency carry trade, and now money, that is currency and stock wealth, is dissipating as trust waines in the authority of nation states and central bankers. The result being that the fiat money system, which has been the driving factor for all economic and political activity since 1971 when President Nixon followed Milton Friedman’s advice and took the US off the gold standard, is being replaced by the diktat money system.
Through the failure of money, that is currency and stock wealth, the new paradigm of authoritarianism and trust in regional governance, totalitarian collectivism and nannycrats is commencing, by Jesus Christ laboring in the household administration of God, Ephesians 1:10, to produce a new epoch and time period.
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