World economy and markets: Through a glass, weakly

Posted: October 10, 2014 in economy
Tags: , ,

FINALLY the penny (or should it be the pfennig) is dropping. The global economy isn’t really doing that well. Your blogger has been banging on about this for months now; while the US economy may have recovered from the surprise drop in Q1 GDP, data from the rest of the world has been much less impressive. The action on Wall Street over the last cpuple of days has been instructive; first, shares rallied on dovish Federal Reserve minutes, then that gain was wiped out yesterday as more weak numbers from Germany came through.A report out yesterday from four institutes predicts that the German economy was flat in the third quarter, after shrinking 0.2% in the second. August looks to have been particularly terrible, with big drops in exports, industrial production and factory orders. Most investors have given up on Italy, and know that France is struggling, but for Germany, the engine of the euro zone, to be heading for recession is another matter.The clue has been in the big market surprise of the year; bonds have performed much better than people expected. Every time US Treasury bond yields perk up, some commentators say this marks the end of the 30-year bull market. But 10-year yields are back down at 2.32% again; German 10-year yields seem to be moored below 1%. Albert Edwards of SocGen is often derided as a perma-bear but he has been consistent in arguing that bond yields …

via Economic Crisis


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