10 Nagging Concerns

Gluskin Sheff’s David Rosenberg has ten nagging concerns…

1. No wonder China can no longer reflate like it did back in 2009. It would be adding more debt to an unprecedented credit bubble

2. Wondering why the Euro is doing so well and the economy is not? Draghi is no longer stimulating as he was last year when he was saving the system. Now he is putting fiscal policy-making as a caveat. In the meantime, the ECB balance sheet is shrinking!

normalized to USD…

Why EURUSD has been rallying…

 

and compared to the rest of the world’s Central banks, the ECB is ‘showing restraint’ though as we noted here – there is a quasi-quantitive easing occurring

3.  One has to wonder what it means for the overall Asian economic backdrop to have Korean exports contracting for four months now… (and only one month of rising exprts in the last 11)

4. Bond yields are backing up sharply as the term premium shifts from being negative to positive. The stock market is starting to pay attention as well, but it seems unrealistic to have 10-year yields near 2% with nominal GDP growth still north of 3%, unless recession or deflation is in your forecast.

Is the Fed losing control?

 

5. Commodities have been on a weakening trend, so the back-up in yields hardly reflects heightened investor inflation concerns…

Are commodities saying the central banks have failed?

6. The Australian Dollar diving to a four-year low the way it has is another signpost of challenged global growth – at least over in Asia…

Aussie dollar goes vertical down under…

7. The same idea lies behind the breakdown in the Hang Seng index – not to mention the plethora ofd EM currencies and bond markets which have come close to imploding in recent weeks. The question is now one of possible contagion…

Breakdown in the Hang Seng…

8. The euro area is in a full-fledged depression with deepening negative GDP growth and a 12% unemployment rate that looks set to move even higher…

 

9. There is no evidence in the fiscal or supply-side (productivity) data to suggest that the euro-zone has come anywhere close to being successful in delivering on structural reforms…

10. The latest slump in the Nikkei and back-up in JGB yields, not to mention the heightened volatility, suggests that the BoJ’s aggressive stance is no longer producing risk-on results…

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David Rosenberg is Gluskin Sheff’s Chief Economist & Strategist and the author of the daily economic report, Breakfast with Dave. You can subscribe to it by visiting www.gluskinsheff.com/research.”

    

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