When I Was Away…
Belisarius was mentally away from the market as he was taking an industry exam… He is sorry for wasting half a year on that, but that’s a thing of a past now…
Thanks to my much relaxed time schedule, the TaintedAlpha.com Blog will have receive some new and improved content and features in following weeks.
Returning to the markets. Things don’t look good. The flood of bad news comes from various parts of the world, but important from Europe, for the time being at least. Equity and commodities got softer and quality (or perceived quality) fixed income got stronger.
The main factor moving the markets was weakening Euro. As I wrote earlier, USD/EUR parity is probable quite probable.
Chart 1. U.S. Dollar / Euro Exchange Rate
Source: Bloomberg
The most notable thing in investor sentiment change is complete loss of confidence in monetary means of getting us out of this crisis. Investors realized that government and central bank stimulus measures have only postponed the pain the world economy will have to bear. Debt restructuring will be the theme for next couple of years.
The reduced global growth expectations pulled down most of the mayor world indexes
Chart 2. S&P 500
Source: Bloomberg
Chart 3. NIKKEI 225
Source: Bloomberg
Chart 4. DJ EUROSTOXX 50
Source: Bloomberg
And maybe the most important of it all, the key to this puzzle – China is not looking good. Rumors are that China real-estate has come to a halt because of government measures to curb real-estate speculation via. reducing (abolishing) credit availability. Chinese equities are world laggard this year despite everything.
Chart 5. Shanghai Composite
Source: Bloomberg
And maybe notable of all, the China import iron ore prices are softening.
Chart 6. China Indian Iron Ore Import Price
Source: Bloomberg
China, DJ Eurostoxx 50, Euro, Iron Ore, NIKKEI 225, S&P 500, Shanghai Composite