NOVEMBER 23, 2011
Just a quick note...
The flow of bad news out of Europe and Asia this morning is quite troubling. These are the headlines making me nervous this morning....in no particular order:
The steep fall in the HSBC flash purchasing managers' index (PMI) to 48 in November from 51 in October largely reflected domestic weakness as both output and new orders shrank even as export orders continued to grow.
The flash PMI, the earliest readout of China's industrial activity, was the lowest since March 2009 and suggests the factory sector contracted during the month. A PMI reading of 50 demarcates expansion from contraction.
This is not encouraging. I've continually warned that a slowdown in China is the most unappreciated threat to the Canadian economy and the TSX. Recall that TD ran a simulation in which China growth slowed to 5%. They calculated that under such a scenario, commodities would shed 40%.
Another interesting tidbit that strongly suggests that commodity prices are facing significant headwinds comes from an anecdote courtesy of Mish: Metal warehouses are overloaded with inventory
Belgians want to renegotiate the bailout deal agreed with France and Luxembourg in October, and get the French to take on a bigger chunk of financing it. But with France's AAA credit rating already in question, media reports said such renegotiations could put that rating at risk further.
Financial crises precede sovereign debt crises. Case in point...
Risk trades are off...big time. In its latest bund offering, Germany was unable to find buyers for 35% of the debt it was looking to sell. This has the potential to be a huge development. If investors lose faith in German debt, it's hard to see how the Eurozone experiment won't blow apart at the seams, and in short order.
It's not all bad news as latest Canadian retail sales jumped (albeit on the backs of car sales, which are currently being financed to the tune of 92 cents on the dollar) and the Conference Board reported that Canadian consumer confidence rebounded, reversing a multi-month slide. However, the Conference Board also noted that the Help Wanted index, which gives a preliminary look at employment trends in large Canadian cities, fell again indicating that the massive job losses Canada experienced in October are unlikely to be recovered any time soon.
And on that note, have a great day!