My Diary 516 --- Where is the Recovery?

February 20, 2009 --- Where is the Recovery?

 

With Dow made a new cycle low overnight, the seven week sell-off in US equities seems bottomless. Indeed, with a series nasty data, including Philly Fed (-41.3), which many look to as an advanced reading on the US ISM, posted its lowest reading since 1990, and the employment sub-index 9-45.8) posted its worst reading ever. The 1% down in SPX doesn’t seem so bad. Other negative headlines worth a note are continuing claims came in much WTE at nearly 5mn, Fitch downgraded Prudential, and GE is traded as a single digit name.

At this stage, there are some divergent views of market/economy. Last evening, Atlanta Fed Lockhart claimed that he sees “catalysts for the start of a modest recovery.”...Where is the recovery? 1) A reduction in excess inventory – I think Mr. Lockhart needs to think harder because a reduction in excess inventory is a necessary step toward recovery, but an expansion of output is another; 2) Jan home sales were up --- I think Mr. Lockhart misses the details as home sales were up because of an increase in activity in areas with significant foreclosures; 3) Improving retail sales in Jan --- I feel lost of his points as gift cards and bid discounts are only accounting numbers, not the real economy recovery.

Regional market, I see Korean won is trading near 1500 and KOSPI drops 1.4% below 1100 now. China remains an eye-catching hotpot as the State Council approves 2 more industry stimulus plans for Light Manufacturing and petrochemical, which I think is generally disappointing without mentioning of any duty cut and windfall tax. In addition property sector got boosted yesterday by a subtle change in policy as SH govt lifted a ban on using foreign currency to pay land premium…HKCN ADR points to 1-2% decline today.

Overseas Market Reviews

Global equity moved down again mainly sue to the 1.2% loses in US, while other regions remain flat. The world equities receded 5.6% since last Friday. Elsewhere, USTs gave back some gains with 2yr up 1bp to 0.96% and 10yr climbed 7bp to 2.83%. 1MWTI oil slipped $0.64 to $38.84/bbl. USD weakened a bit against EUR to $1.264, flat vs. YEN to 94.8.