Join        Login             Stock Quote

It's The (Multi-Speed) Global Economy, Cupid

 February 15, 2013 03:37 PM

Thursday, eurozone Q4 GDP contracted 0.6% q/q, missing expectations of -0.4% q/q. Likewise, Japan's Q4 2012 GDP declined -0.1% q/q.  But Japan nor the eurozone's negative reports much impacted the Valentine's Day mood, as broad markets ended the day flat-to-higher. Historically, a multi-speed global economy with some countries growing briskly and others less so or contracting is the rule rather than the exception. Moreover, some slowing is perfectly normal at this stage of expansion.

[Related -Defensive Sectors Lead Hesitant Market, But Traders Honor Long-standing Bullish Support]

Germany and France, two of the monetary union's biggest economies, declined 0.6% and 0.3% q/q respectively. Italy (-0.9% q/q) and Portugal (-1.8% q/q) also experienced steep declines as they continued dealing with severe economic competitiveness issues and the associated adjustments. However, economic figures—especially so for advance estimates of a broader economy—are subject to revision, often many times in the future with the potential for substantial change one way or another. That's not to say we expect eurozone GDP to materially improve in subsequent revisions—just that the less than stellar print (no matter the degree to which it reflects malaise) confirms what's been known about the region for some time.

[Related -Will Janet Yellen's Outlook Prevail?]

Looking forward, what matters most for the eurozone is maintaining the pace of reforms necessary to boost economic competitiveness, while doing what's necessary to support and maintain the union. Of course, if economic growth lags for a prolonged period or materially worsens, it's certainly possible political support for current parties committed to maintaining the euro wanes. To date though, there's little evidence of a marked weakening in political will or popular support.

In Japan, forecasts called for a small recovery following a Q3 dip of 1.0%. However, the preliminary estimate of Q4 GDP showed a fall of 0.1% q/q as business investment and exports offset strength in personal consumption. Here too, however, economic weakness has been anticipated for a while (some might argue decades). The market seemingly shrugged at the slight miss—and continued looking forward.

Of course, should the eurozone and Japan not return to growth for some time, all's not lost. Rather, as noted earlier, the stronger bits in the world—the US, China and other Emerging Markets—likely continue to carry the rest along, though potentially at an overall slower rate. However, as we've written, slowing global growth in a maturing expansion isn't atypical—and is a factor that has historically favored mega-cap stocks.

source: Market Minder
Disclaimer: This article reflects personal viewpoints of the author and is not a description of advisory services by Fisher Investments or performance of its clients. Such viewpoints may change at any time without notice. Nothin herein constitutes investment advice or a recommendation to buy or sell any security ot that any security, portfolio, transaction or strategy is suitable for any specific person. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
iOnTheMarket Premium


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageDefensive Sectors Lead Hesitant Market, But Traders Honor Long-standing Bullish Support

Last week, the major indexes fell back below round-number thresholds that had taken a lot of effort to read on...

article imageWill Janet Yellen's Outlook Prevail?

Federal Reserve Chairwoman Janet Yellen told the crowd last week that rate hikes are coming. The rise will read on...

article image3 Deep Value Stocks That Could Mount A Turnaround

Although the market action was a bit choppy in the first quarter of 2015, one fact is inescapable: the read on...

article imageFrenzied Speculative Activity In China's Equity Markets

It's time to take another look at the recent developments in China's equity markets as major indices hover read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.