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Overnight Developments April 15, 2010

Posted by Larry Doyle on April 15, 2010 6:52 AM |

There have been a number of developments overnight which highlight the fact that the cross currents on our global financial landscape are anything but smooth and consistent. Let’s touch on a number of these stories with a brief editorial comment so we can most effectively navigate the economic landscape.

1. China’s 1st quarter GDP registers an 11.9% year over year increase. Be mindful this increase is compared to 1st quarter 2009, when the global economy came to a virtual standstill. What will China do to slow their economy from overheating?

Raise interest rates, increase property taxes, allow the yuan to float and thus increase in value, or a combination of all of the above? Chinese equity markets sold off on this news in anticipation that China will have to make some moves to slow the development of an asset bubble. For more on this story, Bloomberg reports China GDP Grows 11.9%, Highlighting Overheating Risk.

2. Consumer confidence in the United Kingdom plummeted the most since July 2008. The once proud nation remains swamped by massive fiscal debts, and prepares for an election for Prime Minister in early May. For more on this, Bloomberg highlights U.K. Consumer Confidence Plunges Most Since July 2008.

3. Home foreclosure filings here in the United States jumped by 16% as banks start to move on many properties which have been delinquent for an extended period. Uncle Sam’s mortgage modification programs and accounting charades have allowed banks the time to hold off on foreclosures, but the housing bomb continues to tick and with this news the pressure on housing is increasing. Bloomberg reports, U.S. Foreclosure Filings Rise 16% as Bank Seizures Set Record.

4. Contagion in the Euro-zone spreads as sovereign debt values decline with pressure remaining centered on Greece but spreading to other nations. Speculation mounts that Greece will be forced to tap the bailout package pledged by the EU and the IMF. If and when Greece taps those funds, I would expect immediate focus on other PIIGS (Portugal, Ireland, Italy, Spain) to face the same music.

5. The Federal Reserve indicates that it will likely continue to keep rates low as the pace of economic activity is not generating jobs or inflation.

6. Has the insider trading scandal centered on Raj Rajaratnam entered into the board room of Goldman Sachs? The SEC is investigating interaction between Rajaratnam and Goldman director Rajat Gupta. The Wall Street Journal sheds light on this developing story, Goldman Director in Probe.

While the Chinese economy will likely attract the most attention from the pom-pom crowd, let’s keep our wide angle lens focused across the entire landscape. Navigate accordingly.

LD

  • Matt

    Larry –

    One more thing is that the weekly initial unemployment claims this morning were 484,000, much worse than expectations and the 4-week average is now 458,000. Clearly the employment situation is not getting any better, and that is a really bad combination to have high unemployment combined with rapidly increasing foreclosures at the same time.

    Matt






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