Around the Globe 06.03.2013

China May HSBC PMI at 49.2, Worst Since October.

China HSBC PMI 06.02.2013

I hate to say I told you so, all right.  On Friday, Bloomberg got all hopey on us putting forth the Chinese recovery narrative based on the official PMI data, but we encouraged astute readers of Dareconomics to consider the other Chinese PMI figure.  Today, the independent HSBC-Markit PMI confirmed that Chinese manufacturing has declined two straight months.  Declining Chinese fortunes are a harbinger of tough times ahead for South Korea, Japan and everyone else in Asia.  Oh, and who, pray tell, is buying all those Eurozone exports destined to awaken the Continent from its torpor?

Europe Markets That May Be Worth Snapping Up.

Eurostoxx 600 06.03.2013

The much celebrated “expert” in this article states

It is too early to talk about growth, but what is interesting is that all the leading indicators we are looking at are currently touching a bottom and the risk of downside is low.

Because the downturn has endured for so long, sell side touts are calling the present situation the bottom, but they have been calling the bottom since the fall.  Since then, GDP has continued its contraction and unemployment has set a new record every month.  This is an historically bad recession, so the simple truth is that no one knows how long it will last and how bad conditions will ultimately become.

Before we go, let’s debunk a few misconceptions that got past the fact-checkers at CNBC.  First, periphery labor costs have not dropped enough to spur growth.  In order for these countries to regain their competitiveness, a further drop of one-quarter to one-third is necessary.  Second, the Spanish budget deficit did not drop from 11.2% to 6.98% of GDP.  The cost of the bank bailout raises the deficit to over 10% for 2012, and Spain is on track to have another 10% deficit for 2013. Just because the EU does not count the bank bailout for purposes of fulfilling treaty obligations does not mean the debt doesn’t exist.

I wonder how those Eurozone PMIs look.

Europe’s Manufacturers Show Positive Signs –

Eurozone PMI 05.2013

What a coincidence.  I was just wondering about this release.  While the WSJ headline writer spun this news to the positive side to increase clicks,  we note that the number has been firmly ensconced in contractionary territory for fifteen months as the Eurozone gets ready to log another another quarter of recession.  PMI does seem to be trending upwards from a November bottom, but it is too early to call the end or even the beginning of the end.

BIS lays out simple plan for how to handle bank failures | Reuters.

BIS Member Nations

This is an excellent plan for conducting a bank resolution.  It is similar to how the FDIC winds down failing U.S. banks.  The Eurozone should take heed.

Analysis: Hungary hails victory of ‘Orbanomics’ but there’s a cost | Reuters.

Hungary GDP Performance Q2Q

The Hungarian government believes that its economic plan is succeeding.  The chart disagrees.  Growth has been anemic since the onset of the Great Financial Crisis, and the trend points down, not up.  None of these facts will stop the Hungarian PM from yammering, and the mainstream media from reyammering.

U.S. Factories Show Surprising Contraction –

Manufacturing sector contracts in May: ISM | Reuters.

US Manufacturing Shrinks; Construction Spending Up.

Manufacturing in U.S. Shrinks at Fastest Pace in Four Years – Bloomberg.

From Bloomberg

From Bloomberg

All you need to know about economists is that they were “surprised” by the contraction in U.S. manufacturing activity in May after two straight months of falling PMIs.  Manufacturing in the Eurozone and China is contracting, so why would anyone be surprised that there is falling demand for American exports? On the plus side, Ben should crank up the magic money machine to 11 if U.S. data continues to disappoint.

Gilts Trail in Worst Global Bond Month Since 2004: U.K. Credit – Bloomberg.

UK 10yr Gilt 06.03.2013 US 10yr 06.01.2013

Government bonds did not do so well in May.  Gilts underperformed Treasuries.  This could be just a little noise, or it could be investors frontrunning the beginning of the BOE’s new Printer-in-Chief Mark Carney’s regime.  I am not convinced that the fixed income bubble is done inflating, but ask me again in two months.

Turkish Stocks Slide as Protests Enter Fourth Day.

Istanbul 100 06.03.2013


If you believe that today’s 10% rout makes it time to BTFD, note the 52 week low on the chart first.  The Istanbul stock market has been very frothy and was probably due for a correction.  These Turkish protests are inexplicable to me.  The Prime Minister has won three elections in a row with nice, fat majorities and has been exhibiting the same authoritarian behavior the entire time.  If the Turkish people are fed up with Erdogan, then why didn’t they vote him out of office when they had the chance?



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