We all knew just how wrong it was as we sat there and listened to the World Bank going on in January about how world economic growth would top 3.2%. Today the World Bank has downgraded economic growth to 2.8%, which some might say is even over the odds
Yesterday, the IMF and World Bank issued warnings about rising interest rates, housing crashes and the global economy. The World Bank’s chief economist is inadvertantly offering important advice to investors and savers when he said that "now is the time to prepare for the next crisis ..."
The World Bank joined the hallowed ranks of the IMF and admitted it was clueless last night, slashing growth estimates for every developed and developing nation from Brazil to the US. The "bumpy start" as they called it merely exacerbated what is now becoming a dismal joke as the death cross of GDP growth expectations and world stock market valuations diverge in an ever more fragile manner.
Overnight saw China spook its markets by weakening the CNY (and breaking the trend again) and suffering a failed bond auction and that led on to weakness across Europe as USDJPY toyed with 102 and dragged stocks and peripheral bonds down. The US opened weak, saw the usual buying spree jerked higher by JPY then as the budge deficit hit (reducing room for monetization money) stocks tumbled to the session's lows and red fo rthe week. Of course that will never do and at around 330ET, as usual, the buying panic began (though in a tiny range). US cash equity markets saw a double dump-and-pump but were unable to scramble back to the green by the close. The USD closed unchanged as EUR tested once again down to Draghi spike lows. Gold and silver closed unch (with a midday dump of $175 million notional in gold futs); oil flatlined (iraq vs world bank) and copper slid (China). Treasury yields closed 2bps lower with the belly outperforming. VIX was slammed at 330 but stocks could not hold their gaisn as The Dow had its worst day in 3 weeks.
Overnight weakness following The World Bank downgrade, China's flip-flop on CNY and failed auction, Cantor's 'compromise-shattering' loss, appeared to be stabilized by a levitating USDJPY but when the budget deficit hit (as expected) it appears the market was hoping for a bigger deficit (and thus more to monetize and moar QE). Stock are diving lower with Trannies worst along with the Russell 2000 -1%. CNBC is already discussing if this is the pullback to buy for the next leg higher in stocks as money on the sidelines floods in...
- World Bank Cuts Global Growth Forecast After ‘Bumpy’ 2014 Start (BBG)
- Al-Qaeda Offshoot Threatens Iraq Oil Site After Taking Mosul (BBG)
- Fed Prepares to Keep Record Balance Sheet for Years to Come (BBG)
- EU investigates tax rulings on Apple, Starbucks, Fiat unit (Reuters)
- Cantor Loss Shocks Republicans, Dims Immigration Changes (BBG)
- More surveillance: Google to Buy Satellite-Imaging Startup for $500 Million (WSJ)
- Tea Party activist who defeated Cantor focused on budget, immigration (Reuters)
- Airbus Suffers Worst Order Loss as Emirates Deal Scrapped (BBG)
- Amazon.com plans local services marketplace this year (Reuters)
- Amazon Stops Taking Advance Orders for ‘Lego’ and Other Warner Videos (NYT)
If predicting yesterday's EURUSD (and market) reaction to the ECB announcement was easy enough, today's reaction to the latest "most important ever" nonfarm payrolls number (because remember: with the Fed getting out of market manipulation, if only for now, it is imperative that the economy show it can self-sustain growth on its own even without $85 billion in flow per month, which is why just like the ISM data earlier this week, the degree of "seasonal adjustments" are about to blow everyone away) should be just as obvious: since both bad news and good news remain "risk-on catalysts", and since courtesy of Draghi's latest green light to abuse any and every carry trade all risk assets will the bought the second there is a dip, the "BTFATH mentality" will be alive in well. It certainly was overnight, when the S&P500 rose to new all time highs despite another 0.5% drop in the Shcomp (now barely holding on above 2000), and a slight decline in the Nikkei (holding on just over 15,000).
Paul Volcker Proposes A New Bretton Woods System To Prevent "Frequent, Destructive" Financial CrisesSubmitted by Tyler Durden on 06/01/2014 19:32 -0400
We found it surprising that it was none other than Paul Volcker himself who, on May 21 at the annual meeting of the Bretton Woods Committee, said that "by now I think we can agree that the absence of an official, rules-based cooperatively managed, monetary system has not been a great success. In fact, international financial crises seem at least as frequent and more destructive in impeding economic stability and growth." We can, indeed, agree. However, we certainly disagree with Volcker's proposal for a solution to this far more brittle monetary system: a new Bretton Woods.
- Yellen Concerned by Housing Slowdown She Has Scant Power to Cure (BBG)
- Because snow in Q1? Citigroup’s CFO Says Trading Revenue Could Slide 25% (BBG)
- Banks Raise Caution Flag on Trading (WSJ)
- The answer is yes: Hilsenrath asks if BOJ’s Kuroda Awakening to His Limits? (WSJ)
- Google Develops Prototype Cars for Fully Autonomous Driving (WSJ)
- Amazon Expects Lengthy Hachette Dispute (WSJ)
- Tencent $1 Billion Game Shows Global Hunt for Mobile Hits (BBG)
When 2014 started, expectations were sky high and as Saxo Bank's Chief Economist Steen Jakobsen notes, policymakers and their support organisations like the OECD, the International Monetary Fund and the World Bank were all quick to call the crisis over and project a true recovery. Now just five month into the year we have seen nothing but disappointing data both relatively speaking but certainly also in absolute terms. As the following presentation outlines, Jakobsen believes we will see new low yields in this cycle this year and that 2014 will also be the year of the low in terms of: inflation expectations, wage/salary, velocity of money, loan demand, lack of reform, and innovation reforms.
China and Russia signed an historic agreement in Shanghai this week - the ramifications of which have yet to be appreciated ... Reserve currency status does not last forever. Empires rise and fall. The world is constantly changing and evolving. Nothing lasts forever …
One of the most intellectually disingenuous statements made by western policymakers is that inflation is tame… nonexistent. However the actions of the World Bank this beggars belief as 'poverty' is re-defined (just like GDP) to ensure the planners can conjure hundreds of billions of dollars out of thin air without any consequences whatsoever. Zero risk.
A specter is haunting Washington, an unnerving vision of a Sino-Russian alliance wedded to an expansive symbiosis of trade and commerce across much of the Eurasian land mass - at the expense of the United States.
The US approach to the Russia/Ukraine situation reflects a serious misunderstanding of the situation. Russia has little choice but to try to raise the price of products it is selling, any way it can. It needs to cut out those who cannot afford its products, including the Ukraine. If Europe increasingly cannot afford its products, Russia needs to find customers who can afford them. There is little chance that the United States is going to be able to help Europe with its natural gas needs in any reasonable timeframe. Our best chance at keeping the global economy “working” for a little longer is to try to keep globalization working as best we can. This will likely require “making nice” to countries we are unhappy with, and putting up with what looks like aggression. Policymakers like to think that the US has more power than it really does, and like to encourage stories suggesting great power in the press. Unfortunately, these stories are not true; we need policymakers who understand our real situation
- China’s Trade Unexpectedly Rises (BBG)
- 'We're already not in Ukraine' - rebel east readies secession vote (Reuters)
- Pro-Russian Separatists in Ukraine Reject Putin's Call to Delay Vote (WSJ)
- Vietnam’s Stocks Post Biggest Loss in Decade on China Tensions (BBG)
- Hedge Funds Extend Their Slide (WSJ)
- Carney Looks to Untested Tools as House Prices Boom (BBG)
- New Draghi Era Seen on Hold at ECB as Euro Area Recovers (BBG)
- Woman With Printer Shows the Digital Ease of Bogus Cash (BBG)
- Regulators See Growing Financial Risks Outside Traditional Banks (WSJ)