Global Financial Markets Go Nuts

The global economy has, let’s say, some issues, including a slight demand problem. Growth has shifted into low gear in China and has stumbled in the US so far this year, while Europe has trouble wading out of the mire. But stock markets jubilated last week:

Hong Kong’s Hang Seng soared a stunning 7.9% followed by the Shanghai Composite’s jump of 4.4%. Chinese stocks are beautifully spiking as everyone in China is now once again gambling on them as a way to get rich quick. It worked out last time too. In Europe, the German DAX rose 3.4%, The British FTSE 4%, and the French CAC 40 3.5%. Stocks have been booming in Europe all year, with for example the DAX up 26% year-to-date! Japan’s Nikkei and India’s SENSEX rose about 2% for the week. The S&P 500 “edged up,” given  how this week has been,  by only 1.7%. It was a phenomenal week for global stocks.

So corporate earnings look terrible for the first quarter. In the US, quarterly earnings estimates have been slashed by the largest amount since 2009, and are now expected to decline. It’s not just energy. Some of this is merely an effort to lower the bar so far that even companies with crummy earnings can still clear it, and that by “beating” the estimates – no matter how terrible earnings are – shares can still march higher. Either way, it doesn’t look good.

It’s just one more phenomenon in a long list of phenomena so far this year in the global financial markets. As Michael Hartnett, Chief Investment Strategist at BofA Merrill Lynch, put it so succinctly:

  • 26 rate cuts by global central banks (569 since Lehman went down)
  • Oil price finds a floor around $50/b after 60% collapse
  • Q1 = third consecutive quarter of positive returns for US$
  • US$ (DXY) quarterly return in Q1 = sixth largest since 1971
  • 2015 US earnings per share now projected to be negative (first time since 2009)
  • $5.3trn of government bonds trade with negative yield
  • March sees >€60bn of Euro corporate bond issuance, largest ever
  • Swiss issue 10-year sovereign bond at a negative yield, first time ever
  • Mexico launches a €1.5bn 100-year Euro bond issue at 4%
  • Swiss franc surges 25% intraday
  • Market cap of US tech/biotech exceeds that of both Emerging Markets and Eurozone
  • Shanghai stocks surge 24%; Russia equities jump 33%
  • Best performing mega-caps: Gazprom (21%), BASF (19%); worst: Wal-Mart, HSBC (both -6%)
  • Portugal Credit Default Swaps narrows 76pps, Greece widens 876pps
  • ECB goes “all-in,” Fed “blinks”
  • Even Iran’s stock market has rallied!

Head spinning? That’s the kind of year it has been!

And now GE has stepped into the fray. Amidst the global euphoria about financial assets of all kinds, it suddenly decided to dump most of its financial assets, including its vast commercial property assets. With impeccable timing: it rides up the bubble over the years, sees it finally mature, and now worried, tries to get out while it still can. But it’s doing a lot more. Read… Moody’s Has a Cow, Slams GE’s Masterful Financial Engineering

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  8 comments for “Global Financial Markets Go Nuts

  1. Petunia says:

    In my area another electronics/computer store chain is closing down, Tiger Direct. This is on top of the Radio Shack bankruptcy. Tiger Direct says they are basically going to be an online business from now on. This doesn’t bode well for commercial retail real estate and is an indicator that B2B is not spending either. I don’t know how all this borrowed money is going to be paid off. I hope they do.

  2. interesting says:

    growth has stumbled so fart this year is an understatement, my work load has fallen of a cliff, my #1 client has sent me 1 project this year……normally it would be about 10.

    if this continues for much longer my 2015 sales will be down 50% from ’14 which were down 20% from ’13.

    just my .02

  3. Michael Gorback says:

    When I say stuff like this you accuse me of reading too much ZH. ;-)

  4. Julian the Apostate says:

    I guess we can say that the ‘euphoria’ stage has set in. Housewives in China?? This reminds me of the story of Joe Kennedy getting out because his shoe shine boy was giving him stock tips. I’ve done all I can to prep (and it was damned difficult to accomplish) and am now watching from the sidelines. Paid my taxes, got rid of one of my 19.9% credit card bills at Citibank(the other is under 10%). I hope the rest of you are not still scrambling but given the IQ of Wolf’s readers I suspect this is not a problem, aside from the occasional seminar poster. Excelsior! P.S. Found the Atlas Shrugged film trilogy at Walmart for $9.98. Bought 4 copies.

  5. Julian the Apostate says:

    Looks like we’re officially in the euphoria stage. Chinese housewives?? Reminds me of Joe Kennedy selling before the ’29 crash because his shoeshine boy was giving him stock tips. FYI I bought the Atlas Shrugged film trilogy at Wal-mart (4 copies). First time I’ve seen it. I wonder who messed up and ordered it for stock? Excelsior

  6. Dave Mac says:

    “The futures so bright we gotta wear shades”

  7. Dead at 18, Buried at 65. says:

    Blast! I don’t understand it! The stock market just keeps going up and up! The bad news about jobs. -It just goes up! The bad news about the bad news. -It just keeps going up! Hey everyone, Switzerland is selling negative bond rates and Mexico sells a 100 year bond at 4.2% – and then in Euros!!! Does it get any crazier than this? Am I mad? -Because everything wrong has turned the world over! I was even asked by a friend, who showed me a video on how great profits can be made from the stock market, and if he should go in? I..,I,… I give up!

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