Morning Report: Giant ECB Decision Ahead
(Stocks in this article: NYSE: SPY, NYSE: DIA, Nasdaq: QQQQ, NYSE: ADM, NYSE: HUM, Nasdaq: GOOG, Nasdaq: MSFT, Nasdaq: YHOO, NYSE: WAG, NYSE: WEN, Nasdaq: RYAAY, NYSE: SDS, NYSE: QID, NYSE: QLD)
Tension is already mounting regarding Thursday's scheduled European Central Bank decision. While the Bank of England is widely expected to cut its target interest rate a quarter point or more, the ECB faces a less obvious economic decline with plainly apparent inflation.
In the U.K., housing issues similar to ours and economic decline leave the Bank of England with a clear decision. However, the ECB has a 3.2% inflation rate to contend with, and Jean-Claude Trichet is on record showing concern. But when the U.S. Federal Reserve views the economic situation so dire to cut the Fed Funds Rate by 1.25% in eight days, can the ECB justify such a contrary or at least passive action as keeping rates steady?
Challenger Job-Cut Report
Challenger, Gray & Christmas reported that planned layoffs reached 74,976 in the month of January, representing a 19% year-over-year increase. What's more concerning to us is the 69% increase in layoffs since December of 2007. Despite fiscal stimulus, we continue to expect retailers to post depressing fiscal Q4 results starting this month.
Tension is already mounting regarding Thursday's scheduled European Central Bank decision. While the Bank of England is widely expected to cut its target interest rate a quarter point or more, the ECB faces a less obvious economic decline with plainly apparent inflation.
In the U.K., housing issues similar to ours and economic decline leave the Bank of England with a clear decision. However, the ECB has a 3.2% inflation rate to contend with, and Jean-Claude Trichet is on record showing concern. But when the U.S. Federal Reserve views the economic situation so dire to cut the Fed Funds Rate by 1.25% in eight days, can the ECB justify such a contrary or at least passive action as keeping rates steady?
Challenger Job-Cut Report
Challenger, Gray & Christmas reported that planned layoffs reached 74,976 in the month of January, representing a 19% year-over-year increase. What's more concerning to us is the 69% increase in layoffs since December of 2007. Despite fiscal stimulus, we continue to expect retailers to post depressing fiscal Q4 results starting this month.
On Thursday, most retailers will post same-store sales for January, and all indications are that growth has declined dramatically. The weekly figures posted by the International Council of Shopping Centers have shown same-store sales generally running between 1-2%, and the rate is deteriorating.
Consumer spending softness should lead retailers to post poor results this quarter, and to announce even more depressing fiscal '09 (Jan.) guidance. As a result, we expect the more proactive of corporate management teams to announce store closures and workforce reduction. We expect the retail environment, as well as the restaurant and other consumer sensitive industries, are saturated in light of the recessionary environment we believe the economy has already entered. The Challenger Report offered no reason to doubt this view.
Asia Catches Up
Last week, Asian markets mostly declined as a monster storm battered China. This morning the Shanghai B Class shares of Mainland China recovered their entire loss of last week in one fell swoop. Still, this occurred even as the World Bank cut its '08 GDP growth forecast for China to 9.6% from 10.8%. World Bank stated that China's burgeoning domestic demand should keep the country's growth robust despite global economic softening. This is a view we've come across on more than one occasion. Still, we remind the mathematically inclined of the significance of change and rate of change. Also, the unsophisticated Mainland market remains at risk to unforeseen events.
Consumer spending softness should lead retailers to post poor results this quarter, and to announce even more depressing fiscal '09 (Jan.) guidance. As a result, we expect the more proactive of corporate management teams to announce store closures and workforce reduction. We expect the retail environment, as well as the restaurant and other consumer sensitive industries, are saturated in light of the recessionary environment we believe the economy has already entered. The Challenger Report offered no reason to doubt this view.
Asia Catches Up
Last week, Asian markets mostly declined as a monster storm battered China. This morning the Shanghai B Class shares of Mainland China recovered their entire loss of last week in one fell swoop. Still, this occurred even as the World Bank cut its '08 GDP growth forecast for China to 9.6% from 10.8%. World Bank stated that China's burgeoning domestic demand should keep the country's growth robust despite global economic softening. This is a view we've come across on more than one occasion. Still, we remind the mathematically inclined of the significance of change and rate of change. Also, the unsophisticated Mainland market remains at risk to unforeseen events.
We are probably nearly reaching the time to look for value in emerging markets and avoid momentum plays in the sector. For now though, we suspect a portion of panicked 401K flows out of U.S. stocks are finding the portfolios of well-promoted emerging funds that have strong past performances. Thus, fund flows could continue to support the emerging markets in the near-term, but eventually the news of global slowdown should reach Main Street as well.
Market-Moving News
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- Bloomberg: Humana (NYSE: HUM) Profit Soars 57%
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posted by The Greek | 9:30 AM
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