Abenomics has made the round trip. The Yen has made up all of its losses, and the Nikkei 225 has given up most of its gains since the 2-2-2 plan was announced in early April. According to both anecdotal and statistical evidence, the weaker yen failed to revive Japanese manufacturing. This is because manufacturing capacity has been leaving Japan since the Asian Flu of 1998.
I will not call an end to this project yet. There is a chance the market rally and yen weakening have paused with investors waiting for the results of elections next month. If Abe’s party wins like it is supposed, the circus may return to town.
Economic forecasts more than one quarter fare no better than chance in predicting the direction of the economy. This inconvenient fact does not stop anyone from trying. If you’re right, you can brag about your acumen to all your little economist friends. If you’re wrong, well, everyone is usually wrong anyway.
As long as the Euro Crisis and it resultant recession have been around, economists have been predicting their ends two quarters into the future. Before you invest on their advice, examine the chart above and decide for yourself which direction Spain is heading.
The reason the Fed will attempt to calm market nerves lies within the chart above. There’s no need to write any more pithy analysis. Just look at the chart, and the Fed’s motive becomes clear. The markets are being targeted by QE in order to create the “wealth effect.” Once the money machine stops, so does the economy.
In this article, the mainstream media begins to question its own Eurozone recovery meme that it has touted since November, 2012. The recovery was an illusion in the first place, and the only thing that has changed is that periphery bond yields have begun rising again, which prompted this article.
In November, the Eurozone was ensconced in a recession where it remains today. Rising rates are not a sign of investors getting cold feet but rather a taper tantrum. Note the day rates starting rising in the chart above. Italy, Portugal and Spain show a similar inflection point in their yields, too.
It’s hard to say what is really happening in China as the country controls releases of its own internal information. However, by proxy we are able to deduce that Chinese growth is falling. Electricity usage is down as are oil imports and rail traffic. China’s trading partners report lower imports from China.
The latest proxy signal of China’s decreasing growth is its deep drop in coal imports. Coal is used for power and to create steel. The precipitous drop in its price and demand over the last year or so shows the true state of Chinese manufacturing.
China is often accused of smoothing its economic numbers, so it will be interesting to see what its 2nd quarter growth is light of all of these proxy economic indicators.
After last month’s euphoria, this months UM numbers have fallen back to earth, not that they were great to begin with. The base reading is 100, so numbers in the 80’s are nothing to write home about. The continuing story of this recovery is its failure to produce a surge in job creation, and this factor will limit growth to the tepid 0-2.5% zone indefinitely.
This is the latest chapter in the ongoing emerging markets jog. Brazil has come a long way from its hyperinflation days, but it does not wish to fall into that trap again. While other countries may wish for a weaker currency to attract imports, the Brazilian central bank thinks of itself first and foremost as an inflation fighter. Don’t be surprised at another rate increase this summer.