Yesterday, the breathless media suggested that China’s drop in GDP pointed to imminent decline in global economic growth and the market followed right along with the biggest decline since last November. This morning, Goldman Sachs, Coke, and Johnson and Johnson all beat earnings expectations top and bottom and …
- The Federal Reserve reported that U.S. Industrial Production for the month of March rose by +0.4%, which was above the consensus for +0.3%.
- The Consumer Price Index for March fell by -0.2%, which was below the consensus estimates for a decline of -0.1%.
- Housing Starts rose 7% last month coming in at an annualized rate of 1.03 million in March. This was above the consensus for 932K and the first time starts have exceeded one million since June 2008.
So, because the market opened in the green this morning, does this mean China is no longer important in the fundamental analysis of the global economy? Are earnings and US economic data more important than China’s .2% drop in GDP? Maybe, maybe not. Maybe, the market needed to sell off just to feel better. Now, perhaps, it will go back to wanting to go higher because the future is brighter than the moment-to-moment reporting indicates.
Putting aside the myopia of the breathless media, the wider view for the market is that economic growth is still on the table. Certainly, corporate America seems less afraid than yesterday’s selloff would indicate.
- The more than $52 billion worth of deals announced on Monday morning made it the busiest “merger Monday” this year, as two large U.S. corporate takeovers underscored increasing CEO interest in pursuing transformational transactions to boost growth and cut costs.
True, the $52 billion is comprised of just three deals, but those deals are whoppers and they suggest, as I have suggested, that M&A activity is still alive and that points to those trillions of dollars of cash-on-the-books going to work. So, if China is in decline and the US economic momentum is in decline, and the Eurozone is one small country away from collapse, why are companies still trying to put together big deals?
- Volatility has come down meaningfully, interest rates are low, corporate cash levels are high and dilutive just sitting unproductively on balance sheets, and there is pent-up strategic demand. This is why we are seeing industry and company transforming deals.
- “There is increasing confidence in the United States as a safe haven and as a stable place to invest,” said Paul Parker, head of global corporate finance and M&A at Barclays.
Yes, maybe there is more to the wider economic and market picture. Maybe China, the US, and the small countries that threaten the Eurozone are actually getting better, not worse.
- Greece received a clean bill of health from its international creditors on Monday. It is on course to contain its debt and pull itself out of a crippling recession next year, the creditors said. Athens aims to achieve a primary budget surplus (before debt payments) in 2013, fulfilling one year earlier than planned a key condition to obtain further debt relief from its creditors.
It is so hard not to write about the US, China, and Europe, as these three giants are the economic world, and soon enough, Japan will once again join their ranks as newsworthy in a positive way.
As to those emerging Latin America economies that are working so hard to become relevant in on the world stage, well, they are working through their political “stuff,” which is not the same stuff of recent decades past, but it is still causing grief.
- Capriles won’t accept presidential result until “every vote is recounted, one by one”
Political turmoil in Venezuela is rippling through the economic reality of the region, if for no other reason than the country is the fourth largest economy in a rather large list of economies in that region. Aside from the politics that dominate the headlines, the region is still dealing with the slow but steady growth of the global economy. My guess is as the big four go, so goes Latin America, so, like the big four, market opportunity is present and waiting.
Trade in the day; Invest in your life …
