What is going on?
We noted on June 12 that the World Bank has lowered its growth forecast for 2009 from a negative 1.7% to close to negative 3%. World Bank Group President announced this prior to the G8 meeting and stressed the global contraction would have particularly grim consequences for poor countries.
Today we have this Bloomberg headline, “Stocks, Copper Retreat on World Bank Forecast; Dollar, Yen Rise“:
Stocks and commodities fell while the yen, the dollar and Treasuries rose after the World Bank said the global economy will
shrink 2.9 percent this year, a deeper recession than it predicted in March.
The Dow Jones Stoxx 600 Index of European shares slid 1.3 percent at 1:20 p.m. in London, while Standard & Poor’s 500 Index futures slipped 0.9 percent. The yen strengthened 0.9 percent against the euro and the dollar rose 0.6 percent. The yield on the benchmark 10-year Treasury dropped six basis points to 3.72 percent.
A flight of capital from developing nations will increase the numbers of the poor and the unemployed, the Washington-based World Bank said in a report today. The projection for a deeper slump than the 1.7 percent contraction forecast in March follows a three-month, 44 percent rally that drove the price-earnings ratio on the MSCI World Index to the highest level in four years.
“The green-shoots story is largely priced in,” Lena Komileva, an economist in London at Tullett Prebon Plc, wrote in a note today. “Judging by the general commentary in recent days focus has started to shift from the overall positive direction of the economic surveys,” she said. That’s “consistent with weak demand, pressured producer profit margins, high unemployment and weaker labor wages,” Komileva wrote…
The World Bank said that while a global recovery may begin this year, impoverished economies will lag behind rich nations. Global growth will be 2 percent next year, down from a 2.3 percent prediction in March, the bank said.
We did note at the time that it was puzzling that the media took so little note of the marked change in the World Bank forecast, since it is usually an above-the-fold news item. And looking at the World Bank site, I do not see a new press release (the older one was dated June 11).
As of this writing, the DAX is down 1.9%, the Footsie is down 1.5% and the CAC is down 2.0%. S&P 500 futures down 9.7 points.
This is probably just the usual “markets will fluctuate” story with Bloomberg searching for explanations, but this one is quite a stretch.
Maybe looking at the results of this story on the market helps explain "why now" are they touting it……….(as do pimps)
Dollar up (stocks down, people "buying" dollars), treasuries up (can't keep both stocks and treasuries up, costs too much), starting an FOMC week and a T-bill sales week………
oops, where's my tin foil………
Yves, there is a new press release (Press Release No:2009/414/DEC), titled "Global Economic Turmoil Having Dramatic Effects on Capital Flows to Developing Countries", dated June 22, 2009:
The World Bank has also released its Global Development Finance (GDF) report today:
Bill 10:46 would appear to have it right on the markets.
Stocks have trended down in the US and Europe since June 12.
Lowered 2010 forecasts suggests a subdued stock market for the rest of this year. In the Great Depression, stocks moved up 1933-6, and down 1937-9, directly in correlation with dividend payouts. We may expect a reversion to that sane investor behavior in the future.
Bloomberg also had another article scrolling across their tv – "Insider Selling at Highest Rate in 2 months."
I think that says it all.
I seldom take Bloomberg's reasons for daily market moves too seriously. I have seen Bloomberg ascribe the same reason to explain why oil has gone both up and down in different stories on the same day. I assume some of these stories are automatically generated.
>>> We noted on June 12 that the World Bank has lowered its growth forecast for 2009 from a negative 1.7% to close to negative 3%. <<<
Most importantly, the "Oracle from Chicago" is further lowering the growth forecasts for 2009 to a negative 10%.
Vinny G. (a.k.a. Oracle from Chicago)
I turned on CNBC for a minute and caught the money honey saying the number was released today too…
the bigger news is that oil is falling despite the tensions in Iran…..remember in the when oil would climb in purported response to fill-in-the-blank attack/maintenance outage/threat of Israeli attack/etc?
The World Bank must not have received their green shoots talking points memo this month.
I've been reading this blog for eight months now and am continually fascinated and enlightened by all of the posts.
I would classify myself as newbie to
the stock market and have invested about 15K USD into various equities
Much to my dismay all of my holding have issued multi-million shares to
raise additional capital the past month or so.
Having made 100% on a couple of lucky bets I consider myself fortunate. But like all gamblers I
have lost a fair amount due to dilution that I didn't see coming.
I will hold those positions now "under water" hoping for a better day in the next 6-12 months.
I've learned a lot about naked shorts and the "pump and dump" schemes that seem to pervade the
At the least I can say that watching
over my holdings these past six months, by reading message boards, blogs, and upgrades/downgrades, has
convinced me that the markets are
rigged and that people like me might be better off putting their
money in a money market account that
grows more mold than interest. At least the mold can be removed.