As noted earlier, and in the aftermath of both the UK and Spain officially double dipping, very soon a majority of Europe will be submerged under the latest recessionary tide which has already engulfed Spain, UK, Greece, Italy, Portugal, Ireland, Belgium, Denmark, Holland, Czech Republic, and Slovenia. The primary wildcard remains Germany, although there is a more than 50% chance that following some very weak PMI data, the country will follow up its already negative Q4 GDP print with another decline, officially pushing the European growth dynamo into recession as well (as for France which reps and warrants that everything is great, it is not as if anyone actually believes those numbers, especially after Hollande becomes president in one week). For everyone who wants to track the European double dip tsunami in real time, the following interactive chart from Reuters is just for you.
- Fed Holds Rates Steady, But Outlooks Shift (Hilsenrath)
- Has Obama Stacked the Fed? Not Really (Hilsenrath)
- High Court Skeptical of Obama’s Use of Power as Campaign Starts (Bloomberg)
- Europe Seen Adding Growth Terms to Budget Rules as Focus Shifts (Bloomberg)
- China Reaches Out to Its Adversaries Over Rare Earths (WSJ)
- Iran Says It May Halt Nuclear Program Over Sanctions (Bloomberg)
- Europe Shifts Crisis Focus to Growth as Merkel Backs Draghi Call (Bloomberg)
- Merkel Wants Rules for Raw Material Derivative Trade (Reuters)
- Evercore Profit Falls 62% as Investment Banking Expenses Rise (Bloomberg)
Following this week's ongoing battery of abysmal economic news out of Europe it will hardly come as a surprise that yet another indicator has been released and is pointing to a multi-year low in the deleveraging (elsewhere called incorrectly austere) continent, namely the Euro-area wide confidence index which just slide to the lowest leve since 2009, missing every single estimate and declining sequentially across the board... And with the UK, Greece, Italy, Portugal, Ireland, Belgium, Denmark, Holland, Czech Republic, and Slovenia now in re-recession, and Spain a definitive shoo in next week, the kicker is that German GDP will almost certainly now report a second consecutive GDP print in a few days, thus pushing the entire European continent in a double dip.
Bloomberg reports U.K. Plunges Into Double-Dip Recession, as does CNBC, UK Back Into Recession in First 'Double Dip' Since 1970sSubmitted by Reggie Middleton on 04/25/2012 07:14 -0500
How can one go to a place they never left? Reference the research we published 2 yrs ago clearly stating that the UK was dreaming about leaving economic slowdown!
Bernanke has laid the groundwork for the next massive dislocation.
It would appear, given the actions and rhetoric of the last week or so, that global central bank printing presses have been switched to 'pause' mode and allowed to cool as implicit inflation 'energy' rears its economic-growth-dragging head around the world (as the bears told us earlier). Whether this leads to a slow grind higher or a tactical correction is the question Morgan Stanley considers in a recent note and their answer is that bullish sentiment, 'under-appreciated' risks, and 'tranquil' markets justify a cautious asset allocation. The focus has switched much more to growth, likely why we have not seen a greater deterioration post-printing yet, but this leaves the market much more sensitive to data surprises (as the backstop of QE has been removed for now). Simply put, we tend to agree with MS' view (given our previous discussions of the volatility surface) that as event and growth risks linger, and with valuations no longer cheap in most cases, expectations of a continued grind higher without a tactical correction are overly confident.
Little that can be added here. The December Case Shiller came, saw, and shut up all those who keep calling for a home price recovery. The Index printed at 136.71 on expectations of 137.11, with the prior revised to 138.24. The top 20 City composite was down -0.5% on expectations of a 0.35% drop. 18 out of 20 MSAs saw monthly declines in December over November, with just the worst of the worst - Miami and Phoenix - posting a dead cat bounce, rising 0.2% and 0.8% respectively. And granted the data is delayed, but the fact that we have now had 8 consecutive months of home price declines even with mortgage rates persistently at record lows, and the double dip in housing more than obvious, can we finally shut up about a housing bottom? Because as Case Shiller's David Blitzer says: "If anything it looks like we might have reentered a period of decline as we begin 2012.” QED
Yesterday, Goldman proclaimed that their new base case outlook is one of a double dip for Germany and France, and hence all of Europe. Now, it is S&P's turn. In a just released report, S&P says that "The prospect that Europe might dip into recession again is looking more likely. The flow of news and market developments in recent weeks, such as sharply deteriorating business sentiment and a projected slowdown in the U.S., has led us to once again revise downward our projections for economic growth in 2012. This follows a number of downside revisions in our last economic outlook at the end of August. We now forecast GDP growth in the eurozone at 1.1% in 2012, compared with 1.5% in our earlier projection. For the U.K., we expect a GDP growth rate at 1.7% in 2012, slightly below our 1.8% projection in August. We still do not expect a genuine double dip to occur in the eurozone as a whole or in the U.K., but we recognize that the probability of another recession in Western Europe has continued to grow. We now estimate the probability of a new recession in Western Europe next year at about 40%. In our baseline forecast, however, we continue to anticipate sluggish and unevenly distributed growth over the coming five quarters." Next up: rating warning for France, and all EFSF bets are off?
Roubini and Soros talked the same double dip recession doom regarding the U.S. and the rest of the world.
Our hats off to JP Morgan for a creative depiction of the current European debt crisis, although we typically take a dim view of any investment vehicle that's associated with the word "leveraged" as recommended by JPM.
Even a broken clock could be right at least twice a day....
Funny how much can change in a month. After everyone was making fun of David Rosenberg as recently as June, not a single pundit who owns a suit and can therefore appear on CNBC dares to mention the original skeptic. Why? Because he has was proven correct (once again) beyond a reasonable doubt (and while we may disagree as to what asset class is best held into the terminal systemic collapse, Rosenberg has been one of the most steadfast and consistent predictors of the 'non-matrixed' reality in the world). Yet oddly enough there are still those who believe that a double dip (or, more accurately, a waterfall in the current great depressionary collapse accompanied by violent bear market rallies) is avoidable. Well, here, in 12 bullet points, is Rosie doing the closest we have seen him come to gloating... and proving the the double dip or whatever you want to call it, is here.