Thoughts on the week
This was a daunting week with equity markets down across the globe. I have the sense that the strength of the recovery is fading – and without some pickup out of the BRICs or via stimulus, we are likely to see a double dip (my baseline scenario). Data this week from the ECRI leading indicators and M3 as well as softness in US GDP, consumption and jobless claims all pointed in this direction.
The week was dominated by news out of Spain and a sense that what was a uniquely Greek crisis was spreading. The Spanish banks are weak and the coming austerity warranted a ratings cut from Fitch. Interestingly, CDS spreads for Spain have been lower than they for Ireland or Portugal, so Spain is not the country one would have anticipated to be next on the list of worries. Because of the weakness in US data, the tightening in China and austerity in Europe, contagion via another credit crisis has market participants alarmed.
However, going forward, I would expect the situation to stabilize. I see no immediate catalyst for panic the way we saw with Bear Stearns or Lehman. What we have now is a simmering crisis with bursts of volatility. The macro data flow will determine where this heads next.
Anyway, that’s it for now. Happy holiday weekend to my British and American readers. Be safe.
Edward
Oh, and here’s some good music to tide you over. Enjoy.
The Week’s Most Popular
- Rosenberg: Markets oversold; correction taken froth out of market
- Andy Xie: Our Market Is A Poor Man’s Casino
- Bob Janjuah: "the Fed goes… QE… If bond markets do revolt… we will then very quickly be ALL OUT!! Cheers, Bob"
- Expecting A Range Bound Market For 2010 Unless We Double Dip
- CajaSur nationalization makes fragility of Spain’s banks topical
- What If It’s All A Lie?
- Hugh Hendry ‘I would recommend you panic’
- Euro: Is Move From May 10th Over? If So, then What?
- New York pension scandal as some collect more in benefits than final salary
- Comstock: Debt Deleveraging Process Will Take Many Years
- ECRI Leading Economic Index at 42-week Low; Recovery is already fading
- Gross: Is it possible to get out of a debt crisis by increasing debt?
- Apple is screwing it up
- European Contagion Spreads; Is This Rational?
- Deficit Hawk Hypocrisy
Links
- News on the pensions bailout and other links
- Links on the European credit crunch and other financial news
- Martin Wolf on trade imbalances, the $60 bn BP bill and other links
- Spanish Banks, Credit Crisis in Europe and other links
- Links on Obama against the world plus Roubini, Mourinho, and more
- Reports on housing bubbles, mortgage delinquencies and other links
- Links on financial reform and more
Distractions