Week in Review - Nov. 22 2009
Markets
Until recently market reacted cheerfully to bad news and good news. Now the mood is more somber and risk reduction in the face of uncertainty is prevailing and all major indices concluded the week sharply down. It is unlikely that those who decide to join the party later will find much to cheer until the end of the year. Regional markets were mostly down, with the exception of Oman and Qatar; DFM index was dragged down by the telecom and financial sectors. The dollar recovered towards the latter half of last week, after the recent rally in global asset prices appeared to run out of steam. Commodities continued to gain, with the gold’s run helping other metals like copper, silver and platinum reach 2009 highs. Oil remains stable at around 77$/b.
Global Developments
America:
• Retail sales grew 1.4% mom in Oct, while “core” retail sales (excluding vehicles, building materials & gasoline) rose by 0.5%. Given downward revision of previous months’ data, this means that earlier estimates of Q3 GDP will be also revised down.
• Oct industrial production was up 0.1% mom, while capacity utilization rate edged up 0.2%.
• Producers’ prices rose 0.3% mom in Oct on the back of rising energy prices but still remain muted; consumer prices were up 0.2% mom (-0.2% yoy), driven by vehicles and energy prices, while rental indexes remained flat, and apparel prices fell 0.4%.
• Housing starts disappointed, contracting by 10.6% mom in Oct (falling for the first time since April) as high vacancy rates are discouraging construction. This raises questions on the “recovery” of the US housing market.
• Initial jobless claims were unchanged, at 505k. The 4-week moving average fell to 514k, and is on a downward trend since early September of 30k per month. At this rate employment could turn positive in Q2 but it will not be enough to stabilize the unemployment rate until end 2010.
Europe:
• UK retail sales were up 3.4% yoy in Oct; this should translate into positive consumption and GDP growth in Q4.
• Spain GDP fell 0.3% qoq in Q3, better than the 1.1% drop in Q2, but yet a reminder that the European periphery remains weak.
Asia and Pacific:
• Japan’s economy grew at a stronger-than-expected annualised rate of 4.8% in Q3, as the fiscal stimulus supported consumer spending and net exports rose.
• Japan’s government announced that the economy was back in deflation, the announcement coming after the Bank of Japan kept interest rates near zero and upgraded its economic assessment.
• Singapore’s Q3 GDP grew by 0.6% yoy, after a 3.3% contraction in Q2, with improvement in both domestic demand (through government consumption) and trade.
Bottom line: The data last week did not add much to the patterns of global improvement. Once again Asia surprised somewhat on the upside, while in developed economies, especially the US data were lackluster at best, especially in the construction sector.
Week in Review - November 15th
Markets
The main theme on global stock markets is risk reduction. Regional markets were down, except for the UAE markets which gained from Monday’s speech by Sheikh Mohammed bin Rashid al-Maktoum; DFM was up 3.3% from last week. Dollar fell through key levels to fresh 15-month low on Wed. Gold hit a record high on Thur and was up 2% from last week. Crude oil prices came under pressure after US inventories data indicated a broad weakening in demand conditions. The Baltic Dry index, the global benchmark for freight costs for dry bulk commodities, outshined all other commodity indices by rising 21.2 % to 4,111 points over the week.
Global Developments
America:
• The latest quarterly Fed loan officers survey points to continued tightening in lending conditions but at a much slower pace than in the past and there are also signs of credit demand slowing at a much slower pace than before. Almost 60% of the responding banks saw unchanged or rising credit demand, the highest reading since July last year
• Initial jobless claims continued to recede at a modest pace, falling 12,000 in the week ended Nov 7 to 502,000.
Europe:
• Germany Sep industrial production (IP) was up 2.7% mom, much higher than expected; Italy’s IP fell 5.3%, the worst reading since the series began in 1990. Eurozone IP rose 0.3% on German IP strength.
• Eurozone GDP turned positive in Q3 (+ 0.4% qoq), though the rebound was less strong than in the US. Exports were the main driver, while private consumption remained fragile. Q3 GDP for Spain (-0.3%), Italy (+0.6%), France (+0.3%), Germany (+0.7%).
• Rise in UK unemployment was flat in Q3 at 7.8%. Bank of England forecast uplift in growth and is widely expected to keep interest rates low. Fitch warned the UK government debt could risk losing its triple A rating.
Asia and Pacific:
• Chinese data releases for Oct confirm strong growth led by credit fueled domestic demand. Chinese industrial production grew 16.1% yoy, the fastest in 19 months. Growth in retail sales (16.2%) and fixed asset accumulation (31.8%) continue at their recent trends; growth rate of new bank lending has slowed significantly since mid-year, with Oct lending only +0.6% mom.
• Hong Kong’s Q3 GDP contracted by 2.4% yoy (Q2: -3.6%), weakened by exports of goods, while private consumption and service exports rose. GDP was up +1.6% qoq – the second quarter of positive growth after four consecutive quarters of contractions.
• Japan’s current account surplus grew +0.2% mom to JPY 1,567.9 bn in Sep. Sep’s core machinery orders were up 10.5%mom.
• Indian industrial production grew a strong 9.1% yoy in Sep, helped by growth in the capital goods (+12.8%).
• Indonesia Q3 real GDP growth came in at 4.2% yoy, higher than the 4.0% in Q2 but in line with the consensus.
Bottom line: The data flow has not produced any major surprise. Global recovery was broad based in Q3 with Germany picking up strongly among Euroarea countries. Unemployment and commodity price increases represent the main concerns.
Week in Review - Sept 13
Markets
Markets are in a phase of consolidation, while a few leading equity indices set 2009 highs. Regional markets were mostly down, with the exception of Saudi and UAE markets. The DFM was up 4.2% from last week, with the transport and real estate sectors gaining around 6% each. The euro scored another record high for the year over the dollar at above 1.46 although later the US currency recovered some ground. The weakness of the dollar helped gold close above $1000/ounce, while oil closed the week just under $70.
Global Developments
USA:
• Fed’s Beige Book report noted stabilizing conditions though with the cloud of “soft” consumer spending and the weak employment situation.
• U.S. core capital goods orders were up 23.8% in July over Q2.
Europe:
• German manufacturing orders were surprisingly strong, with monthly orders up 3.5%, led by intermediate goods, but manufacturing production data conflicted with this upbeat figure falling 0.5%m/m (with capital goods being the weakest sector).
• UK industrial revival was underlined by manufacturing output strongly up 0.9%, 3m/3m, sa through July
• The European Central Bank in its revised forecast is projecting annual growth of just a few tenths for 2010.
Asia and Pacific:
• Machinery orders in Japan were weak in July, down 24.5% from the Q2 average and Q2 GDP was revised down to 0.6% qoq.
• A whole bunch of Chinese data releases strengthened the recovery story - Aug industrial production was up 12.3% yoy (July:10.8%); Auto production was up 90%, cement 24% and steel 22% (all yoy); retail sales growth continued to accelerate (Aug:15.4%) while Aug fixed asset investment was up 33.6%.
Bottom line: A major shift in inventory accumulation has driven the powerful upturn of the last few months. An important consequence of this phenomenon is a revival in world trade induced by the global supply chains and commodity exports which would be extremely beneficial to a major global trade hubs. For the rest of the year further stockpiling and additional fiscal stimulus will pull the US economy, parts of Western Europe, and most of Asia out of the recession. In 2010 these effects will wane while rising unemployment and corporate bankruptcies risk to sap the recovery.
Week in Review - 1 Nov 2009
Markets
Equity markets fell last week, despite better than expected figures on the US GDP. Europe was severely beaten (-5%) , Japan’s loss was less (-1%). Emerging markets lost more than 5% with the GCC index only marginally better. The DFM lost 6.4% with the real estate sector dropping 11.4%. The dollar regained some strength as risk appetite is waning. Oil prices dropped to around 77$/b and gold lost some ground, but remains well above 1000$/on.
Global Developments
Americas:
• US Real GDP grew 3.5% in Q3 (qoq, annualized), but was still 2.3% lower than a year ago. The figure was better than expected, due mainly to a stronger contribution from inventories and resilient consumer spending.
• The labor market picture was mixed: initial claims for unemployment were unchanged but long term claims were lower.
• Home prices, as measured by the S&P Case Shiller Index, increased by 1% in August, the third consecutive gain of this magnitude.
• October consumer confidence fell as attitudes about job availability/ labour market conditions reached a new low. The Richmond Fed index also reported setbacks in both manufacturing activity and service sector revenues.
• Durable goods orders for Sep were up 1.0% mom (but down -17.4% yoy), the gain coming from less volatile components - bookings for nondefense capital goods other than aircraft — a key indicator for future business equipment spending, rose 2%.
Europe:
• Eurozone bank lending declined for the first time signaling a weak recovery, strengthening the case for the European Central bank to keep the policy rates low. Business and consumer confidence in September continued to increase slightly.
• Germany’s yearly inflation was flat in October, not surprisingly given that retail sales were down 0.5% mom in September.
Asia and Pacific:
• South Korea’s Q3 GDP grew 2.9% qoq, a seven-year high, also the first growth after three consecutive quarters of yoy decline. Private consumption and export growth rebounded to positive terms, while equipment investment remains the biggest drag.
• Japan industrial production for Sep grew by +1.4% mom, with government policies such as tax cuts and recovery in external demand driving production. Deflation is still pronounced with CPI down 2.3% yoy in September.
• The Reserve Bank of India left rates unchanged but hiked the statutory liquidity ratio by one percentage point to 25%, surprising the market and signaling the end of policy easing.
Bottom line: The effect of the emergency stimulus is waning, without having had much effect on employment. As a consequence consumer confidence is sagging, which raises serious doubts on the sustainability of the recovery. Markets are extremely nervous as the gloss from corporate earning is less shiny looking forward. The world economy will likely enter 2010 in a somber mood.
Week in Review - Oct 4 2009
Markets
Markets worldwide registered a slump last week, but emerging markets had a slower decline than the advanced economies. Gold crossed the 1000-mark yet again last week, alongside higher oil prices – but retreated slightly after the release of weak US data on Friday. The dollar and yen gained after the announcement of weaker US jobs/payrolls data.
Global Developments
USA:
• US unemployment rate touched a high 9.8%, with 263,000 jobs being lost in Sep, a higher than expected figure, which caused investors to question the strength of the recovery.
• The Conference Board consumer confidence, fell in September contributing to upset market expectations.
• The Case-Shiller U.S. house price index jumped 1.2%m/m, sa, in July, to be down 13.3%yoy. In the last 3 months, the seasonally adjusted index is up an annualized 8.7% suggesting start of recovery in housing.
Europe:
• The E.U. measure of economic sentiment rose to 82.8, recovering from the low of March. The main gains came from consumer confidence and the service sector. Manufacturing sentiment did not improve much, and the construction sector remains depressed.
• Consumer and business confidence in Euroland continued to improve in September.
• German inflation for Sep declined to -0.3% yoy another sign that deflation pressure is not abating.
• Russia and Romania cut interest rates 50bp, to 10% and 8%, respectively to support economic activity.
Asia and Pacific:
• China’s private sector PMI was 55 in Sep, slightly lower than August’s. The employment subcomponent strengthened, to 53 . Both measures confirm steady growth in China.
• Japan’s industrial production was up 1.8% mom in Aug while Korea’s was the only one in the region which fell 1.3% mom.
• Japan’s Tankan survey showed a significant improvement in business sentiment for manufacturers.
Bottom line: Data flow was mixed, but markets which were looking for stronger signs of improvement, were disappointed and are entering into a volatile phase. The atmosphere could be cheered up by U.S. corporate reports Q3 to be released this month, but it is palpable the feeling that the rally in equities might have been overstretched.
Week in Review September 6th
Markets
Markets are in a phase of assessment waiting for more confirmatory news concerning potential global recovery, as illustrated by the downbeat reaction to good news, especially the US ISM. Equity prices are generally weak while bond prices are consistent with rather subdued expectations. The better than expected US jobs report on Friday enabled some equity markets to compensate their earlier losses. Regional markets witnessed a similar trend with both UAE bourses almost unchanged over the week. The yen hit its highest level in nearly two months against the dollar. Commodities prices fell to one-month lows on Friday with Dubai Fateh oil around 67$/b. Gold however closed the week up 4.2%, reaching a six-month high of almost $1000/ounce.
Global Developments
USA:
• Consumer and business sentiment as measured by the University of Michigan and the Conference Board surveys remained subdued. Retail sales were also weak.
• The ISM survey reported the first expansion in industrial activity since Jan 2008, with orders up sharply due to inventory liquidation and a boost to auto production. Pending home sales and the residential component of construction spending were also up significantly
• Unemployment rate reached 9.7%, the highest since 1983, but the news about fewer job cuts than expected in August, overshadowed the news about the higher unemployment rate.
Europe:
• The European Central Bank left the policy rates unchanged, but sounded a note of caution on the Eurozone’s economic rebound, forecasting only a “very gradual recovery”. August inflation data showed a smaller decline (-0.2% yoy) compared to July’s -0.7%.
• Euroland’s PMI survey increased in July, but despite the improvement of the past few months the survey still indicates recession. France is the first country with a reading above the recession threshold while Italy, Ireland and Spain are lagging. The figure in the UK was also disappointing declining again into recession territory.
• Euro area unemployment rate was up a tick to 9.5% in July. Since April the increase has moderated largely thanks to German unemployment which fell again in August after declining in July. German employers are waiting until after the election to fire workers. The unemployment situation is likely to worsen in Euroland, because so far strong labor protection laws have held back lay-offs.
Asia and Pacific:
• India’s Q2 GDP is the latest from Asia to register positive growth - up 6.1% yoy (Q1: 5.8%), with an increase in government consumption along with a decline in trade components.
• July industrial production data from Japan, Korea and Thailand show a strong start to Q3, up by about 2% mom in all three countries.
• China’s PMI reading was up in August (the highest reading since Apr 08) and confirms that the recovery remains on track. Likewise, the PMI was up in India and Taiwan, showing an upbeat mood.
Bottom line: China’s performance (and its impact on the rest of Asia) and the US consumption data have become the main focus lately. The removal of loan policy accommodation by the Chinese central bank which was more forceful than expected has led to a decline in the stock market (because it restricted credit to buy shares) but is unlikely to affect real economic growth. US consumption, which is key for global recovery remains weak. In this environment equity markets need genuinely new information to move up.
Weekly in Review - August 24th
Markets: Daily fluctuations in risk appetite continue to spur volatility in all markets, but equity indices and exchange rates remain range bound. On Wall Street the S&P 500 passed the 1000 psychological threshold and most other markets were broadly up, despite two rollercoaster sessions in China (down 5% one day up 4.5% the next) affected all emerging markets. Oil rallied almost 10% from the minimum as a big decline in U.S. inventories ignited a rush to cover short positions and is now solidly over 70$/b. Gold continues to fluctuate mostly in tandem with the dollar which weakened somewhat against the other major currencies.
Global Developments
USA: The real estate market remains weak with new house starts down 1% mom in July, and 37%yoy. The recovery seen in June (+3.6% mom) has evaporated quickly. Initial jobless claims increased to 576,000, indicating that labor market conditions are still broadly depressed. The only silver lining for the US this week came from the leading indicators which were up 06.% mom.
Europe: Surveys data were upbeat with the PMI recording the second sharpest rise on record almost 4 points to 49.5 for the services index driven by a surge of sentiment in Germany (54.1 after 48.1). The manufacturing index was also up but much more moderately (47.9 after 46.3). The ZEW index which gauges economic expectations in Germany rose to 56.1 in August from 39.5 in July, taking the indicator to its highest level since April 2006. Based on past experience the data are consistent with Euroland GDP rising by about 0.2%qoq in Q3, after a drop of 0.1% in Q2. UK inflation was flat on the month and up 1.8% yoy, a notable difference with the euro area where prices are decreasing. Retail sales increased 0.4% mom confirming the resilience of consumers even in these testing times.
Asia and Pacific: Japan’s GDP increased by 0.9% in Q2 as a result primarily of the stimulus package which boosted consumption. Singapore’s July non-oil domestic exports fell by 8.5% yoy, after falling 11.1% yoy in June. The pace of decline has significantly slowed compared to the 29.8% yoy drop in January-February. Taiwan GDP fell 7.5% which is much less than the -10.5% in Q1. Growth rebounded in Q2, largely thanks to a surge in domestic demand offsetting the weakness of the export sector.
Bottom line: The data flow was scarce last week and it has not dramatically changed the global picture. Q2 saw an overall global improvement in economic conditions, but with striking diversity. Emerging Asia recorded generally double-digit q/q, saar, GDP growth rates, while North America continued its slump, driven by deep ongoing adjustments in the U.S. (especially the labor market) and a weak auto sector (GM and Chrysler). Europe was in the middle, with parts that resemble the U.S. (U.K., Ireland, Spain) and countries following in the wake of Asia driven by Industrial Production (Germany, France, Poland). Q3 will see the crucial test for the global economy, i.e. whether the stabilization in Q2 will be followed by a recovery. The equity markets are heavily betting on this outcome while the bond markets foresee a continuation of easy monetary policy and weak growth. They cannot be both right.
Week in Review July 26th
Markets: Broadly positive corporate earnings reports, signs of stabilization in the US housing and labor markets and positive economic reports from the emerging markets added to the bullish mood in equity markets last week. All regional markets continued to rally, and the DFM reacted positively on Thursday to the announcement of the creation of the “Dubai Financial Support Fund”. Higher stock prices and renewed hopes of recovery led traders to seek riskier higher-yielding assets. The dollar had a volatile week, but oil and gold prices were up from last week, rising 4.7% and 1.5% respectively.
Global Developments
USA: In his testimony to US Congress Bernanke’s discussion of the economic outlook was more pessimistic than the policy statement issued in June. Bernanke was particularly concerned about lower household spending. The US Leading Indicator increased by 0.7% in June, reinforcing expectations of economic stabilization.
Europe: The pace of decline in manufacturing orders in the Eurozone decelerated in May for the first time since September; however the level is still 28.5% lower than a year ago. Lower energy prices pushed down Germany’s yearly inflation to -0.2%. In France households’ consumption of manufactured goods declined in May, and consumer confidence slipped in July, suggesting some underlying weakness in consumer demand. The Purchasing Manager Index for the Euro area rose in July and the same sentiment was reflected in July’s German IFO survey where the current conditions component scored a large monthly increase. Not all news was positive though: UK GDP fell by 3.1% qoq, sapping hopes of recovery,.
Asia and Pacific: Japanese Prime Minister Taro Aso dissolved Parliament and called early elections for late August. All polls predict a defeat for the ruling Liberal Democratic Party which, except for 11 months, has ruled since World War 2. On the data front, signs of recovery continue – Taiwan and China’s IP and exports continue to rise, and Japan’s exports increased in June. Korea posted 2Q GDP up 9.7% qoq, seasonally adjusted, led strong gains in manufacturing output. Singapore’s June IP however was weak,
Bottom line: The stabilization of the world economy in Q2 and the reduction in systemic risks, led primarily by Asia, has been confirmed by the latest spate of data, including encouraging signals from Europe. Essentially the global economy has moved from steep contraction to something closer to zero growth, but the important issue is whether this stabilization will give rise to sustainable growth. The data so far suggest that the demand will be weak for some time in the US, Eurozone and Japan, but that growth is likely to be significantly stronger in large emerging markets such as China and Brazil.
Week in Review July 12
Markets: After the euphoria of the second quarter investors are focusing on labor indicators and discount good news on those sectors (e.g., industry) which are improving. There is a general sense that stocks valuations are overstretched. The onset of the US corporate earnings season heightened the growing sense of unease about the global economic outlook. Equity markets in the region were sharply down for the second week in a row; the financial sector in the Dubai Financial Market suffered heavy losses after the S&P downgraded major banks while real estate sector continued to slide down. Oil suffered a sharp correction, falling below $60 a barrel for the first time since mid-May, as bearish US supplies data took its toll on investor sentiment. Rising risk aversion also led to a volatile currency market with erratic daily movements.
Global Developments
IMF sees the global economy emerging from the recession “but stabilization is uneven and the recovery is expected to be sluggish.” Economic growth next year may be 0.5% higher than projected in April 2009 which means 2.5% growth, but in 2009 contraction will reach 1.4%, worse than previously estimated. Emerging markets will slow sharply, growing by only 1.5% in 2009 before rebounding to 4.7% in 2010. China will see growth of 7.5% in 2009 (8.5% in 2010) and India 5.4% (6.5%).
The most concrete outcome from the G8 summit was a $20 billion aid package over 3 years for a “food security initiative”. A diverse set of topics ranging from financial regulation to a new economic stimulus were discussed, but views remained divergent on actions.
USA: ISM index of non-manufacturing activity grew by 3 points, with most major components rising in tandem. At 47, the index still implies contraction, but at a slowing pace. U.S. first-time jobless claims dropped 52k in the week ending July 4th, while continuing claims rose 159k – partly as a result of the auto-shutdowns in May-June. The labor market remains fragile.
Europe: Germany’s Industrial Production rose 3.7%mom in May, a lot stronger than expected and, confirming the rebound, manufacturing orders data posted a strong 4.4%m/m rise in May. The momentum in the industrial sector has swung decisively through the first half of this year and May data from France, Sweden and Emerging Europe echoed this recovery: Hungary’s Industrial Production was up 2.6%m/m, sa, Turkey’s IP was up by an estimated 2% mom sa, Romania’s industrial sales rose 4.9%m/m. French exports were up 4.5%m/m the strongest monthly gain since the onset of turmoil in 2007. On the negative side, UK Industrial Production was contracted by 0.6% mom in May, Italy’s was flat, Holland’s was down by 1.8% qoq.
Asia and Pacific: The strongest rebounds are evident in Asia: Taiwan exports were up 4.8%m/m in June, and were up 96%, sar, from Q1. In Q1, they had been down 60%, ar, from Q4. China reported for June a $8.25bn trade surplus, with imports jumping $12bn on the month, and exports $7bn. Imports growth is a reflection of the stronger-than-expected acceleration in domestic demand growth. India’s budget for FY2009-2010 had a significant negative impact: the Sensex fell 5.8%, led by financials. The rupee was down 1.3%. Investors worry about the high borrowing levels in the new budget with deficit forecast at 6.8% of GDP for FY09/10, up from 6% in FY08/09 (and an initial estimate of 2.5% of GDP). Risks of downgrade loom if fiscal discipline proves to slip further away.
Bottom line: Most economists are revising up growth estimates for 2010. However, they remain divided about whether the recovery will begin in the latter half of 2009 or be delayed until 2010. Consensus suggests that the U.S. economy might bottom in H2 2009 and that Chinese acceleration in H2 2009 could be more pronounced. The outlook however remains weak for Europe (especially the East) and Japan.
Week in Review July 5th
Markets: Global financial markets completed a second quarter that showed changes wholly consistent with an upturn in the global cycle: the S&P rose 22%, the MSCI EM index was up 51%. U.S. 10-year yields rose 63bp; and the spread of EM bonds narrowed by 239bp. Oil and other commodities have rebounded strongly. Investors are divided over the prospect that Q3 will see stabilization or a further jump up. On currency the role of the US dollar has been questioned and the green back is generally down compared to Q1 also because of fears over long term fiscal sustainability. But People’s Bank of China Governor Zhou emphasized that dollar stability was the right policy for now. A significant development came from the IMF board which approved last week a large issuance of bonds to members. The main buyers will be emerging market countries (especially in Asia) looking to diversify (slightly) away from USD.
Global Developments
USA: Consumer Confidence fell to 49.8 in the month of June, following two months of recovery, with insight into some labour market deterioration (respondents stated that jobs were harder to get). The pace of job losses quickened in June, with unemployment rising to 9.5% in June (May: 9.4%) as 467,000 jobs were lost in June (more than 100,000 worse than expected). Some good news came from PMI rose to 44.8 (42.4 in May), with the production component rising to 52.3, its strongest reading since Jan08.
Europe: The European Commission reported that its eurozone “economic sentiment indicator” rose substantially in June. Optimism rose among consumers, in the service sector and somewhat less in industry. The predictive power of these surveys is under scrutiny, as “hard” data are still weak. Euro area unemployment rate for May was up two ticks to 9.5%. Inflation in June was negative for the first time since records started, highlighting the risk of prolonged Japanese style deflation. The ECB remained on hold, but Trichet hinted to possible new rate cuts. The Riksbank cut rates 25bp, to 0.25%.
Asia and Pacific: Data are generally more upbeat: Japanese industrial production was strong in May, up 5.9%mom for the second straight month. The revised manufacturing production estimate for June also posted a 3.1%m/m gain. Assuming this holds, production would end up 40%qoq, sa in Q2 (having been down 38%, saar, and 63%, saar, in the previous two quarters). Korean IP rose another 1.6% mom, sa, in May. Production has now climbed 19% since December (not annualized) with exports in June up 17% mom. PMI indices from China are above the 50 mark, confirming the return to global growth as the mature markets struggle.
Bottom line: Three elements will drive the global economy in the second half of 2009: a) the slow healing of Western financial institutions (with some problems likely to resurface in Europe); b) the lagged reaction of the real economy to the credit crunch, in terms of unemployment, defaults and restructuring; c) the long term reconfiguration of the economic landscape with the baricenter shifting to Emerging Markets. Last week’s data essentially confirm these trends (and our long held view) that growth will strengthen in EM especially Asia leading the rebound.