Aug. 19 (Bloomberg) — Robert Hagstrom, a portfolio manager at Legg Mason Funds Management, talks about the performance of the stock market and investment strategy. Hagstrom, speaking with Maryam Nemazee and Erik Schatzker on Bloomberg Television’s “InsideTrack,” also discusses global economic outlook and the impact on equities. (Source: Bloomberg)
Citigroup, JPMorgan Raise Recession Fears
Citing a sharp decline in growth and an uncertain political climate, Citigroup Inc. and JPMorgan Chase & Co. both recued their outlook for the U.S. economy for the remainder of the year and into 2012. JPMorgan analysts issued a note to clients predicting that U.S. Gross Domestic Product for the fourth quarter will fall from the earlier prediction of 2.5 percent to an anemic 1.0 percent. The bank also suggested the slowdown will extend into next year with the growth outlook for the first quarter of 2012 now slashed from 1.5 percent to just 0.5 percent.
Citigroup also picked up on the theme cutting its 2011 growth to 1.6 percent for the current year from an earlier view of 1.7 percent. For 2012, Citigroup has revised its stance downwards from 2.7 percent to 2.1 percent.
Growing Recession Fears
In addition to the outlook downgrade, both banks signaled the growing possibility of a return to recession for the U.S. economy. Morgan Stanley told clients that with the weaker growth now expected in the U.S. as well as a slowdown in Europe, the global economy is “dangerously close to recession”.
JPMorgan’s chief economist, Michael Feroli, echoed the same sentiment noting that the revised outlook makes the risk of a recession “clearly elevated”.
The political climate in Washington was also called into question in the wake of the debt crisis debacle that very nearly forced the country into defaulting on its debt payments. Citigroup analysts suggested that the “political paralysis” made for an uncertain future with little progress expected on plans to deal with the growing deficit and mounting debt.
Scott Boyd is a currency analyst and a regular contributor to the OANDA MarketPulse FX blog
Bartsch Says European Economy Will Grind to `Standstill’
Aug. 19 (Bloomberg) — Elga Bartsch, chief European economist at Morgan Stanley, talks about the outlook for Europe’s economy and the region’s bond yields. She speaks from London with Owen Thomas on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)
JPMorgan’s Gartside Says Euro Bonds `Solution’ to Crisis
Aug. 19 (Bloomberg) — Nick Gartside, international chief investment officer of fixed income at JPMorgan Asset Management, talks about proposals to introduce a common euro bond and his government bond strategy. He speaks wih Francine Lacqua on Bloomberg Television’s “On the Move.” (Source: Bloomberg)
Jersey Says 10-Year U.S. Treasury May Fall Below 1.75%
Aug. 19 (Bloomberg) — Ira Jersey, an interest-rate strategist at Credit Suisse Group AG, talks about the U.S. economy, Federal Reserve policy and the bond market. He speaks with Lisa Murphy on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)
Buckland Sees Global Stocks Up 20% Over Next 12 Months
Aug. 19 (Bloomberg) — Robert Buckland, global equity strategist at Citigroup, talks about the outlook for global markets. Buckland speaks with Lisa Murphy on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)
German Producer Inflation Grows 0.7% in August
The German Producer Price Index (PPI) rose a surprising 0.7% this past month, beating out expectations for a meager 0.2% increase, up from last month’s 0.1% growth. The PPI report measures the percent change in the price of goods sold by manufacturers, indicating both growth in demand and rising material costs.
Inflationary reports like the monthly PPI figure highlight levels of price increases across a nation’s economy. Price increases reflect several influences in both positive and negative directions, but tend to bolster confidence as they are a sign of growth. Price decreases, known as deflation, are more worrisome for the cyclical trap they tend to generate on regional growth. With today’s significant uptick in Germany’s PPI, the EUR may find some added confidence injected prior to the week’s closing.
Read more forex trading news on our forex blog.
British Government Spending Less
In a not-so-surprising turn of events, the morning’s release of public sector net borrowing out of Great Britain revealed a slow down in the level of spending at the governmental level. Publically owned corporations and national, as well as local, governments spent 2 billion pounds less than they earned in revenue.
The report, issued by the Office of National Statistics, highlights the austerity attempts by the British government to control runaway spending and reduce the nation’s deficits. The 2 billion pound monthly surplus is a step in the right direction for such an initiative and it will be interesting to see where these funds go over the next few months.
Read more forex trading news on our forex blog.
New Zealand Credit Card Spending on the Rise
A report released by the Reserve Bank of New Zealand (RBNZ) this morning published the latest findings on the level of consumer spending taking place through the medium of credit cards. The findings revealed a 7.3% increase, year-on-year, in such personal expenditures among New Zealanders.
Credit card spending differs from other types in the sense that it bears a correlation to consumer confidence in future economic growth. Typical consumer spending is the use of disposable income, but credit card spending is a commitment to future income. The growth represents a positive indicator for growing optimism in New Zealanders’ outlook on their economy.
Read more forex trading news on our forex blog.
European Bourses Fail to Stabilize
The downward trend for European bourses continued this morning with the major indices all trading in the red and gold prices reaching a new all-time high. The euro has recovered off of its lows following reports of the ECB bond buying but USD strength could reemerge once trading gets underway in North America.
Worries that European banks are not well capitalized to deal with significant losses from a sovereign default or a US recession has European equities deep in the red. Yesterday’s disappointing US economic data and increased inflation did little to stabilize the situation. One European bank has been borrowing dollars from the ECB for the first time since February. The SNB has also activated its swap line it holds with the Federal Reserve. The German DAX is down 3.50%. The FTSE 100 is lower by 1.85% and the French CAC 40 is down by 2.20%. Asian equities also finished the day down sharply.
The euro has fared better than European financials with rumors of the ECB back in the market buying Italian and Spanish bonds. This has supported the EUR/USD with the pair rallying back to 1.4400 after failing to break below yesterday’s low at 1.4270. As the New York trading session gets underway the euro could come under renewed pressure should US stocks move in the direction of their European counterparts. The EUR/USD has a short term retracement target at 1.4420 with resistance is located at 1.4500. Support is at 1.4350 and yesterday’s low.
Canadian CPI was in-line with consensus forecasts of 0.2% m/m. The CAD initially was sold following the news but the ensuing euro rally helped support the commodity currency. The Loonie is currently subject the events in Europe and in the US for direction as the USD/CAD has a high negative correlation with the S&P 500. Initial support for the pair is found at 0.9775 but has a 61% Fib retracement level at 0.9640.
Read more forex trading news on our forex blog.
