I am off to Barcelona this morning. A plane awaits me at the airport to ferry me back to the US. When I step on that plane, my adventure here will come to a close. It will be good to be back home …
If you don’t mind, I want to start my day with one of my favorite targets in this column – the breathless media. Okay, so I am doing my homework this morning and I come across the headline below.
China January-April FDI inflow at $37.9 billion, outlook dark
The first clause is fine, but the author could not resist going for fear in the second. Now, here is the essential fact of the article.
The Commerce Ministry said on Tuesday that the country drew $37.9 billion in foreign direct investment (FDI) between January and April, down from $38.8 billion attracted in the sameperiod in 2011. April’s inflow alone was $8.4 billion, down from$8.5 billion a year ago.
The above numbers alone do not make the “outlook dark.” In fact, the drop is relatively small. Furthermore, the drop should be expected, as China is slowing economically, by design, I might add. And when you look deeper into the numbers, the reality of the minor drop is easily explained.
FDI from the European Union dropped 27.9 percent year-on-year in the January-April period, while inflows from the United States rose 1.9 percent. FDI from 10 Asian economies rose 0.6percent to $33.1 billion in the same period, the ministry said.
Europe is the weak link and the reason for the drop. So, once again, the circle turns back to Europe. If the EU can get its act together, the FDI numbers from China will change. So, if I am that writer, I would not choose the word “dark” to describe the current situation. To be accurate, the writer could have said, “outlook cautious.” I know that would have made me happier, and for those who only read the headlines, or skim the articles, it would be less fearsome. Once again, though, I am tilting at windmills, as “cautious” does not sell as well as “dark.”
Once again, the market is behaving as expected. Greece’s government, the financial issues associated with Greece, the general fear around Europe, and the JP Morgan fiasco led the way yesterday to a triple-digit loss on the Dow.
Concerns about the implications of continued political impasse in Greece undermined sentiment in the early going and sent stocks sharply lower at the open and finishing near session lows. Financials were a steady drag on trade.
The market has found its groove, and it is to the downside. The only way out of this is for Greece to form a coalition government that holds onto the signed agreement about how Greece will handle its debt. If it fails to do this, expect the market to behave accordingly for some time. This could get ugly as the market technicians and the short players now have an opening, and I expect they will march through it in force. Be wary. In the meantime, think about the following … There just might be aother way out, after all.
German gross domestic product grew 0.5 percent in the first quarter in seasonally adjusted terms – five times as fast as expected – as exports helped the economy bounce back from a contraction of 0.2 percent in the fourth quarter.
Trade in the day; Invest in your life …
