Posted May 16th 2012
Europe vs. U.S.
While the Europeans, along with the rest of the world, wrestle with the likelihood of Greece leaving the EU, economic numbers here in the U.S. have decidedly improved.
This morning the report of Industrial Production in April rebounded strongly from a poor showing in March. It was up 1.1% and was the strongest showing since December of 2010. Also, it was broadly based not confined to just one or two sectors.
Builder optimism rebounded as well. The Builder Sentiment Index rose to 24 which was the highest number since May of 2007. Still a reading over 50 is considered to be healthy. However, this morning a strong housing start report up 2.6% and strong revisions for March's number reflected the better prospects of the construction industry.
The EU reported that overall they have not fallen into recession though many member countries have. That is because Germany, which represents 30% of the economic output for the entire Euro zone, surprised the experts with GDP growth in the second quarter of .5% instead of the .1% that was expected. That number with the size of Germany's economy brought up the entire EU zone. There are some bright spots amongst the ruin of many economies of Europe and I note that those bright spots are all the countries that have practiced some fiscal discipline over the last many years or they are very small countries with little legacy of long term deficit spending.
Expect more of the same: improvement here in the U.S. and angst in Europe.
Good Trading
Steve Peasley
Posted May 14th 2012
Adding a Little More Uncertainty
Economic numbers from China and India added downward pressure to an already weak market. In both countries growth is still slowing, much of it due to continued turmoil in Europe and last year's efforts to slow inflation. They have now moved beyond just slowing down growth to too much of a slowdown. It demonstrates the imperfect relationship between government efforts to manage large economies and a free, or in China's case a semi free market system.
Both China and India have started to move toward loosening their tight grip of money by lowering interest rates or allowing more lending. But current efforts are now seen as too weak and slow. More will be done now that the numbers for April are out showing a sharp decline in growth.
There is no doubt that what happens in the two most populated countries, one being the second largest economy in the world, will affect the U.S. It will add to uncertainty over the summer. At the same time stock markets will recognize efforts made by these two countries to reignite growth, thus stock prices will move up long before any benefit of their expansionary efforts are seen in their economies.
We are going see more volatility then we have seen in the first part of the year for stock prices. The volatility may not be a strong as it was last summer but that will depend on the economic numbers as they unfold over the months ahead.
Good Trading
Steve Peasley