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Global Economic Reports Are Disappointing.

  • Written by Syndicated Publisher 254 Comments254 Comments Comments
    March 23, 2012

    Now that the euro-zone debt crisis has been kicked down the road another year or so, analysts and markets have turned their attention back to normal concerns of economies and earnings.

    Unfortunately they’re doing so just as the reports are becoming more worrisome in Asia and Europe, and less impressive in the U.S.

    Earlier this week disappointing Chinese housing data, and a warning from giant mining company BHP Billiton raised concerns about the direction of the second largest economy in the world, where economic  strength has been so important in supporting anemic global economic recoveries the last few years.

    Those concerns were not helped by this morning’s report that the HSBC China PMI index fell more sharply than expected in March, falling to 48.1 from 49.6 in February, and remaining beneath the level of 50 that separates expansion from contraction.

    And in Europe it was that the 17-nation euro-zone PMI fell to a three-month low of 48.7 in March from 49.3 in February, worse than forecasts, adding to concerns that Europe is already in another recession.

    In the U.S. most reports, particularly on employment, remain positive. But potential cracks in the impressive U.S. recovery are also showing up.

    Among them have been that Factory Orders fell 1.0% in January, Durable Goods Orders fell 4.0% in January after rising 3.2% in December, the ISM Mfg Index unexpectedly declined in February, to 52.4 from 54.1 in January, Construction Spending declined in January versus the consensus forecast for another increase, new housing starts unexpectedly fell 1.1% in February, and existing home sales fell 0.9%, while the inventory of unsold homes jumped 4.3%.

    Keep in mind that at our buy signal in October, the reports were still mostly ugly, but a few rays of light were showing up. We potentially have the opposite situation shaping up now.

    Is Goldman Sachs behind the curve again?

    Goldman has been making headlines this week with some wildly bullish pronouncements.

    Jim O’Neill, chairman of Goldman’s Asset Management Allocation, appeared on CNBC to say that stocks are at the beginning of a big upside turnaround.

    An anchor on the show said, “That’s good news, Jim, but I wish you had told us that six months ago.” [the S&P 500 has already gained 29% since the October low].

    O’Neill replied saying something like, “But I didn’t just turn bullish. I’ve been bullish since February.”

    Asked “How do you square your bullishness with some Goldman analysts in other departments who were bullish in the fall and say the S&P is now overbought and vulnerable to a correction?”

    The reply was something about there always being differing opinions.

    The anchor then asked, “So why should we believe you over the analysts in other Goldman departments?”

    “Because I am the chairman of my department and they used to work for me.”

    Okay.

    To read my weekend newspaper column ‘There is now a new type of ‘wall of worry!’ Click here.

    Images: Flickr (licence attribution)

    About The Author

    Sy Harding publishes the financial website www.StreetSmartReport.com and a free daily Internet blog at www.SyHardingblog.com. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!
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