Daily commentary: On the global growth slowdown and US multinational earnings
The link I want to highlight today is on the relationship between the slowdown in growth globally and US multinational earnings. Estimates for earnings growth have started to erode already because it is now clear that US firms cannot make up for the slow domestic growth with outsized growth abroad. Not only is Europe in recession but other countries are in a slowdown mode as well. The result is an erosion of earnings growth at companies in the S&P500. This effect is mostly about top line growth. However, if you combine this with my anticipated margin compression issue, you have the makings of a cyclical bear market (in a larger secular bear).
This is why I still think that US equities might underperform their European brethren, one of my predictions from early in the year. Year to date, the Stoxx Europe 600 Price Index is down just over 4.3% while the US S&P500 is down only 1.7%. but the European index has a much lower multiple on it given the crisis. And that means there is a lot more downside risk in the US from here. I should also highlight the article on Inditex, a Spanish retailer that owns the Zara brand. They are doing rather well despite significant home market exposure. I have watched this brand grow over the past decade and it has great global potential.
That’s it. Here are the links.
Highlight
Analysis: Economic pain takes toll on U.S. earnings forecasts | Reuters
Spain
BBC News – Spain’s jobless level falls for second month
Spain is in ‘total emergency’, the EU in total denial – Telegraph
Zara’s owner bucks the economic gloom to outgrow Spain’s retail banks | Business | The Observer
Bank bailout makes Spaniards question their future as euro agonies mount | World news | The Observer
Europe
Portuguese banks turn to bailout fund for capital | Reuters
A real banking union can save the eurozone – FT.com
The week that Europe stopped pretending – Telegraph
Merkel Rejects Debt Sharing as Obama Urges Europe to Do More – Bloomberg
George Soros says Germany has three months to save the eurozone – Telegraph
Rajoy proposes set up of euro zone fiscal authority | Reuters
Europe’s debtors must pawn their gold for Eurobond Redemption – Telegraph
France warns Greek euro exit on the agenda if bailout measures not imposed – Telegraph
BBC News – Cyprus would seek EU bailout money ‘if necessary’
Cyprus Is Close to a Request for Bailout – WSJ.com
Other
The FDIC Continues to Promote the Fantasy That It Can Resolve Megabanks « naked capitalism
Egan-Jones Lowers UK Rating to AA- From AA – MarketBeat – WSJ
Global slump alert as world money contracts – Telegraph
Cotton Falls to 31-Month Low as Supplies Outpace Demand – Bloomberg
Number of the Week: Most Unemployed Have College Experience – Real Time Economics – WSJ
Google Is Buying Meebo (Updated)
Groupon market cap slips below $6 billion – MarketWatch
Can an Evita banknote get Argentines to love their pesos again? | beyondbrics
OMG! John Taylor REALLY Misunderstands Hayek « Uneasy Money
Japan shares fall sharply, Topix hits 28-year low | Reuters
Indian Refiners Cut Record-High Gasoline Prices After Protests – Bloomberg
Are the UK, US and German safe havens safe at all? – Telegraph
Canada GDP Grows 1.9%, Below Central Bank Forecast – WSJ.com
FT Alphaville » Debunking goldbugs
FT Alphaville » Gold’s Anti-Social Behaviour Order
BBC News – Will Canada’s housing bubble burst?
Foreign-language links
Una juez argentina bloquea cualquier indemnizaci?n a Repsol por la expropiaci?n – ABC.es
Austérité: comment trouver 5 milliards d’économies par an? – LExpansion.com
En contra de las previsiones de Aníbal Fernández, el dólar informal se vende a $5,97
El Gobierno niega presiones de Alemania para que acepte el rescate a la banca – ABC.es
Fiskalpakt: Grüne lassen Bedingungen für ein Ja im Dunkeln – Deutschland – Politik – Handelsblatt
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